5 Things You Didn’t Know About Header Bidding

header bidding

By Evan Krauss, VP Publisher Development, Americas and
Nishant Khatri, Director, Product Management

Over the last six months or so, header bidding has been a hot topic in ad tech industry circles, with headlines spanning from explanations of what header bidding is (e.g. WTF is header bidding) to strong arguments for or against the marketing tactic (e.g. 50 percent CPM uplift from header bidding and Publishers weigh the downsides to header bidding).

To level-set, header bidding is a programmatic advertising tactic implemented by a publisher to elicit more bids on its ad inventory. This is executed through an on-page piece of JavaScript code in the “header” of a publisher’s website—thus the term, “header” bidding. While this concept isn’t a new or remarkable breakthrough in innovation, some are heralding it as a game-changing booster of CPMs, while others are skeptical and wary of the effect the practice will have on page load times and technical upkeep.

Clearly, there’s a bit of confusion as to how to think about header bidding, even among industry experts, so we’ve pulled together five header bidding myths floating around the industry, and the truths behind those myths, especially when it comes to benefits for publishers:

MYTH #1: “The revenue gains from header bidding are incremental and minor at best.”
TRUTH: Header bidding has very real revenue payoffs.

So much inefficiency lies in the dated practice of waterfalling that header bidding can have an immediate and noticeable impact on publisher revenues. In a waterfall method, demand sources (i.e. media buyers) are ranked by priority, and the ad server calls on each one-by-one until the impression can be filled, rather than calling all of the demand sources simultaneously. Effectively, this is like picking up the phone and calling each and every buyer for an ad sale instead of opening up the sale via auction.

Header bidding solves this issue by opening up access to all demand sources at the same time, consequently helping publishers find the highest CPM or highest yield on each impression each time. Publishers are already realizing significant benefits from using header bidding, with many seeing 50 percent increases in average CPM, and some seeing even higher than that.[1] According to a recent publisher and advertiser survey from AdMonsters, 80 percent of those using header bidding solutions see revenue gains, with nearly 30 percent of those seeing “strong” revenue gains.

MYTH #2: “Header bidding is a brand-new solution.”
TRUTH: Header bidding has been around for several years and is used by hundreds of premium publishers already.

Header bidding as a tactic has been around for at least five years but hasn’t gotten a lot of attention until recently. This is because the technology has hit a point of maturity that delivers enough value for the technical effort to implement it. In an industry of this scale (i.e. trillions of ad impressions per day), slight optimization tactics can yield fractions of a penny per impression—which translate into hundreds of thousands to millions of dollars in revenue to a publisher’s top line.

However, as with most digital ad products, header bidding requires a technical implementation, which equates to an expense and draw of resources for publishers. Header bidding has taken off because we’ve reached a tipping point where the potential gains in revenue exceed the costs of implementation. Today’s leading solutions are also easier to implement and use than they have been in the past. Couple that with concerns about the quality of consumer media experiences, fluctuating inventory pricing and the need for control and transparency on the rise, and you have an environment that demonstrates a need for header bidding solutions.

MYTH #3: “All header bidding solutions are the same.”
TRUTH: Header bidding solutions available in the market range from basic tags that yield limited demand to holistic solutions that not only attract a breadth of demand but also encompass ad serving, monetization and analytics capabilities.

Advertisers and publishers are publicly celebrating the advent of header bidding. The CPMs don’t lie—it’s a great alternative to traditional waterfalling and a way to provide better value to publishers’ inventory. However, publishers and advertisers need to understand that all header bidding solutions are not created equal.

Some header bidding solutions are point solutions, tied to a limited number of demand sources with few integrated services. While those solutions may provide some of the same monetization benefits as other solutions, they are not as impactful in scaling a publisher’s advertising business. Premium publishers need holistic technology solutions to support a header bidding strategy, specifically functionality in ad serving, workflow automation, yield management and real-time analytics. They need a technical infrastructure, functional user interface and appropriate service and support in order to make the most of their header bidding solutions, once implemented. Header bidding is not going to solve all of a publisher’s inventory problems, and it might even come with its own challenges as well (see the next must-know point).

MYTH #4: “Header bidding leads to issues in technical implementation and page latency.”
TRUTH: The right header bidding solution has a simple implementation and minimal impact on page latency.

It’s Web 101: Every time a publisher adds code to a page, the page will take slightly longer to load (think individual milliseconds). In today’s fast-paced, interactive media environment, adding even a fraction of a second to a page load time can ruin a content experience for consumers, especially on a mobile device. Some industry experts view page latency as one of the primary reasons ad blocking has become so prevalent as of late. Consumers are reacting to anything that could interrupt their content engagement, and long page load times certainly fall under that category.

While latency remains an ongoing issue for publishers, both because of content decisions and ad tags, the reality is that every piece of code (content or ad related) added to a page should now be evaluated for latency to ensure a high-quality consumer experience. Sometimes, less is more; and simpler pages are often better media experiences. (It is important to note that header tags load simultaneously with page content, so the two are not competing.) However, back to Truth #2, every added piece of code is a tradeoff. Sometimes, the right tag on a publisher’s page can lead to more monetization opportunities and increased revenue, justifying and necessitating its inclusion. Effective solutions also eliminate “pass backs” (or undelivered impressions), which represent inefficiencies in an ad serving process.

The bottom line is that header bidding isn’t a solution that should be used alone—it must fit into a broader, more holistic solution to be successful. When publishers are smart about the tags they use, the benefits can outweigh the drawbacks.

MYTH #5: “Header bidding is an attack on Google’s stronghold in the ad serving space.”
TRUTH: Header bidding is about giving control back to publishers.

Much of what has been written on header bidding over the past several months has positioned the tactic as a way to loosen Google’s grip in the ad serving space. Effectively, Google’s DoubleClick for Publishers (DFP), which has the lion’s share of the publisher market, is closely integrated with Google Ad Exchange (AdX) and gives AdX a specific benefit over its competitors: In the DFP waterfall process, AdX is given the first and last opportunity to win impressions, consequently impeding competition from other buyers. This is detrimental to marketplace optimization and publisher operational efficiency.

The truth is that header bidding is not an attack on Google’s products. It is an innovative tactic that allows publishers to reduce dependence on DFP and AdX. As a result, publishers can take back control of their ad serving capabilities, which is an important process innovation that can result in higher CPMs and in the short term and increased revenue for long-term sustainability.

The real truth in all this is that a publisher’s top priority should be developing and delivering compelling content to its audience. In order to effectively support their successful content businesses, publishers need to establish a technical architecture to own their ad operations. Header bidding allows publishers to take back their control of their ad serving operations and, as a result, garner increased revenue opportunities from a wider breadth of demand sources. In effect, this levels the playing field for publishers and allows them to compete with the Facebooks and Googles of the world, who are very adept at monetizing their audiences but typically don’t actually produce any content of their own. As publishers pursue profitability, header bidding is an important foundational tactic in their toolbox that can help contribute to overall success.

For an even deeper dive into header bidding, download PubMatic’s white paper, Decision Manager: Your Inventory. Your Rules.

[1] http://digiday.com/publishers/header-bidding-publishers-boosting-cpms-much-50-percent/

 

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