How header bidding is shaping the programmatic landscape
Header bidding was the buzz word of 2015. While publishers were still building their waterfall strategy for the inventory, Index Exchange proposed a new model.
Index research shows that transactions on the private market places represent 35% of the advertising volumes in Canada as opposed to 8% in the US. The real dollar value of these transactions is the same. The same amount of dollars is being transacted in US and CA in private auctions. There is a small number of publishers who are responsible for the big chunk of Canadian inventory, so Canadian buyers gravitate toward 1:1 connections.
Mediative is using Index as our supply side platform, so we had the first hand approach on the header bidding technology. We decided to try it on a couple of our properties. This is a game changer and we wanted to be sure that we are taking the right approach.
What is header bidding?
Header bidding is a piece of code that is scripted to a publisher website allowing all buyers to see all impressions in parallel. This facilitates the highest bidder win. The code plugs into an API call that is opening the door to all demand systems to bid on the impression. The model can be totally open, or set up to give priority to guaranteed impressions or call specific deals first.
Why is this important for publishers?
In a waterfall ecosystem, the impression goes from one level to another and the value decreases as the impression goes lower in the funnel. Also, not everybody gets access to all inventory because of the complicated ecosystem of buying and selling and the walls that are between the selling side and the demand side.
Let’s take a real example.
Let’s say that an impression can be purchased first programmatically through a preferred deal. The floor for this impression will be $8. If there are no bids a this price, the impressions goes to the next level, into private auction. Here the floor is set at $6. Again there are no bids and the impression goes into CPAX, according to our waterfall set-up, for a lower floor.
If this impression is not monetized on either of those channels, it will go on open exchange for a price between $1,5/CPM and $2/CPM. The header bidding set up has given us an average of $10,9/CPM for the same impression.
We are in the world where two entities are trying to make the most out of the dollar. The publisher wants to monetize the inventory for the highest value possible and on the other hand, the trade desk, or the demand side, has the mandate to get the best impression available for the client’s KPI at the lowest price possible
Many trade desk and tech companies have seen the opportunity to buy inventory on open exchange, thus waiting for the impression to go there to bid. The overall image is that the impression is not sellable, thus losing value, but the reality is that this impression is highly transactionable on open market. The impression’s perceived value decreases artificially, not because it becomes less valuable, but because we are artificially lowering the value of inventory by building the waterfall model.
The header bidding gives priority to all buyers at the same time, in the most effective (low latency) and simple way possible, bypassing platform and tech stack, thus increasing the value for publisher and reducing the cost of transaction.
Available inventory is pushed up to all demand sources at the same time. Price floor jumps. Index Marketplace Data shows that after header tag integration the average digital display prices jumps three times on open and 40% on private exchanges.
Here is a simple video on how header bidding works:
Many people will claim that low latency will generate more problems with page loads, thus increasing the rise of ad blockers. My answer to that is chose your partners wisely, and look for new ways of loading ads that will not have an impact on user experience.
The beauty of advertising is that it changes all the time, so in a fast environment like this, the only quote that comes to mind is one of Bruce Lee: “If you pour water in a cup, it becomes the cup, if you pour water in a pot, it becomes the pot. Be water, my friend”.