Header bidding: How a simple hack became standard practice

by Tim Sheets, Senior Director, Monetization, ‎OpenX

It’s been nearly one year since digital advertising heralded the emergence of header bidding. The practice promised to end of the traditional waterfall setup with reverberating effects across the entire ecosystem.

What some viewed as a hack to insert more programmatic demand into a publisher’s ad server quickly turned into standard practice for publishers looking to yield higher CPMs in a transparent marketplace for all buyers. Though header bidding didn’t hit the mainstream until 2015, we’d been working on this technology for several years by that point. Today, more than one third of the impressions on the OpenX platform are purchased via header bidding integrations with some publisher partners experiencing revenue lifts exceeding 50 percent.

The immediate takeaway: If publishers at large aren’t already experimenting with how to apply this technology across new media formats, or how it can be leveraged to accelerate existing buying methods such as PMPs, they should be.

New Media Formats: Mobile & Video

Just like on the web display side, ad serving for mobile apps and video relies on an inefficient setup that uses fixed price estimates for external programmatic demand sources to determine which ads are served. When publishers rely solely on these fixed estimates, they leave revenue on the table and the buy side is frustrated with diminished access to inventory. However, the value proposition of header bidding, full access and fair pricing, truly magnifies the potential of programmatic for mobile app and video publishers.

First, due to the scarcity of premium inventory and fragmentation in the market for ad serving and advertising networks, many impressions delivered to app and video consumers are not even exposed to the full potential of programmatic demand. Adding a header bidding platform instantly opens up inventory to new channels and advertisers. More competition and better targeting for buyers means publishers can move away from bulk selling and carve up inventory into higher yielding segments.

Second, access to mobile app and video supply through header bidding platforms and their DSP partners gives branding campaigns the chance to compete with performance-based advertisers on a level playing field. For example, on mobile apps cost-per-install campaigns managed by other app developers have historically been a dominant source of revenue, while traditional brand marketers have been limited. Header bidding platforms introduce a class of demand that’s typically complementary to a developer’s demand, ultimately serving to further maximize yield.

Accelerating Private Marketplaces

With the advent of private marketplaces (PMPs), brands have the opportunity to leverage the efficiency of programmatic to reach premium publisher audiences. Publishers can provide preferential access and information to yield significantly higher CPMs in a way that wouldn’t be possible via open exchanges.

Often revenue generated from PMPs fails to live up to the hype. Campaigns deliver far fewer impressions than first anticipated, leaving publishers and advertisers frustrated. Header bidding promises to overcome the challenges associated with PMPs including their limited scale, inflexible priority settings, and inability to provide guarantees.

Since PMPs generally involve more granular buyer targeting, the available inventory pools shrink before a single impression is run. Header bidding exposes one hundred percent of a publisher’s inventory to PMP buyers and enables publishers to prioritize PMP demand appropriately within the demand stack, providing an immediate multiplier on delivery and revenue. Further, many PMP deals are sold with or would benefit from differentiated priority levels, often times ahead of direct sold campaigns. Header bidding addresses this issue by giving publishers the chance to assign a dynamic priority setting based on the deals eligible for each impression.

Finally, by not giving publishers and buyers the ability to make any firm volume or spend commitments, PMPs lack a compelling feature of traditional direct sold IOs. At OpenX we’re working to close the gap by granting publishers the ability to sync audiences directly with advertisers and to forecast the overlap of that audience with available inventory. Leveraging this information, both sides can provide commitments on availability and spend, allowing PMPs to deliver both the certainty of delivery and the option of choice, thereby enhancing the historical direct sold buying paradigm.

As header solutions integrate with new ad formats and accelerate marketplaces, smart publishers should look to implement header bidding technologies in new ways to further drive revenue. 2015 has been characterized as the year of header bidding, but it would be more apt to describe it as the first year of header bidding.


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