Commentary

Waterfall To Header Bidding Enhances Programmatic Benefits

According to a new report from ClickZ, authored by Rory Edwards, publishers are rushing headlong into header bidding, the popular new technique sweeping ad tech by storm. With the rapid increase in adoption on the sell-side, header bidding is a good thing for publishers, says the report. But what does the emergence of header bidding mean for brands?

“Traditionally, publishers have sold ad inventory using a technique known as waterfalling, says the report, a process that gives inventory access to different sets of buyers sequentially based on their priority in the eyes of the publisher.

As programmatic buying has matured and become an outlet for advertisers’ more premium advertising efforts, this hierarchical and sequential bidding process is leaving money on the table by placing guaranteed deals above the often lucrative CPMs available from programmatic buyers, says the report.

The priority can be determined by a variety of things, says the report, but often it is based on the revenue potential for the publisher, quantified by the amount of committed spend of an advertiser, or the historical average selling price for SSPs/Exchanges.

In the last year, however, header bidding has turned the historical waterfall model on its head. Publishers are now able to offer all of their inventory to all demand sources at once, opening the doors for RTB buyers to compete for the most premium inventory that was historically only accessible through guaranteed bulk purchases.

In effect, publishers are taking the demand from what used to be multiple sequential auctions, and collapsing this into one single, highly competitive auction that ensures publishers can extract the highest value for each impression. Most recently, Facebook joined the mad dash, experimenting with header bidding across numerous channels in its latest attempt to challenge Google.

Header bidding, the great equalizer for programmatic access, yields several reasons brand marketers are on the bidding bandwagon. Many premium publishers are “head over heels” for header bidding, says the report, as media owners aren’t the only ones benefiting. Programmatic’s latest poster child holds tremendous promise for brands, too, notes the report. 

1) More inventory

  • Under the waterfall method, programmatic buyers have limited access to inventory, only getting access to the inventory that was not allocated to direct-sold campaigns at a higher rate. But with header bidding, a publisher is likely to make more of its inventory available to anyone who wants it. In doing so, publishers have the opportunity to increase profits, and buyers gain access to a wider selection of ad space, such as premium content or low session depth impression opportunities.

2) Full audience

  • Thanks to header bidding, programmatic buying platforms can now see every impression opportunity for publishers utilizing header bidding. This translates into an enhanced ability to see where their target audience spends their time and plan campaigns accordingly. This will enhance digital planning through comprehensive audience insight that was previously unavailable in the waterfall world, says the report. 

3) Enhanced premium buys 

  • Private Marketplaces (PMPs) were created to enable advertisers to gain access to the most premium inventory available. However, the “best” inventory in programmatic has not been the same as the best inventory a publisher had and much of this premium inventory cleared higher in the waterfall, says the report. Header bidding expands the reach of PMPs to all of the publisher’s inventory, opening the door for even more widespread application of premium programmatic buying. 

4) Brands, beware

  • Any blind auction carries inherent risk of overpayment, and header bidding increases this risk, as it increases competition, and can make the second price auction behave much more like a first priced auction. This may cause some bidders to overpay for inventory due to a simplistic bidding strategy, and spend more than they ought to on certain ad spaces, cautions the report.
  • Ultimately, buyers will develop tools and models to account for these upward pricing pressures, and will adjust their bidding behavior to ensure they are buying inventory at a price that meets their performance objectives. Until then, the sell side will gain asymmetric benefits from the emergence of header bidding.

5) The promise of header bidding

  • Sky-high prices in programmatic auctions will decrease over time as brands and their agencies become more accustomed to header bidding dynamics. But header bidding symbolizes more than just new inventory and high prices. It is a sign that the industry isn’t just using advanced programmatic techniques to trade remnant inventory anymore; programmatic is now being used to buy and sell premium inventory.
  • For brands, the less obvious opportunity enabled by header bidding is the ability to expand the application of programmatic buying to a larger portion of their media plan, notes the report.

Concluding, says Edwards, “… what have historically been unsophisticated and inefficient guaranteed buys transacted directly with publishers can now be executed in a data-driven manner. This new format applies the data, decisioning and optimization of real-time bidding with the promise of minimizing wasted spend and enhancing the ROI of these campaigns.”

For additional information, please visit ClickZ here.

 

 

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