• by Tobi Elkin  @tobielkin, May 17, 2016

Panelists at the OMMA Programmatic Conference on Tuesday seemed to agree that header bidding, while complex, can be beneficial. On the panel entitled “Headers Up: How Does Header Bidding Change Both Bidding And Selling?” participants were generally in agreement about the fact that header bidding delivers on the promise of higher overall yield and greater leverage in the marketplace.

Header bidding enables publishers to get the highest offer for their inventory when they can see direct and third-party buyers in a single view. And it puts the auction at the beginning of the process. By the same token, buyers receive complete access to a publisher’s inventory and audience before a call to the ad server is made. Still, there are pitfalls: Header bidding can add latency, resulting in slower page loads, complexity and cost vis-à-vis tech integration and implementation. Plus, demand sources vary in quality and reliability.

A panel of publishers, led by Alanna Gombert, VP, technology & ad operations, Interactive Adverting Bureau (IAB) and Deputy General Manager, IAB Tech Lab, expressed their views. She asked the panel to generally define header bidding for those who don’t know what it is. For the record, it’s a snippet of code that goes on a page and sends a bid into the ad server ahead of the auction. The ad server sees the actual dollar amounts advertisers are willing to bid.

Header bidding is “great for us because we want to create a unified marketplace so people can bid on the entire marketplace,” said Jason Tollestrup, director of programmatic and business intelligence, The Washington Post.

Panelists agreed that while header bidding can be complex, the alternative is even more convoluted: “When you make your inventory available to a third party on the supply side, you have to make sure what the average yield is, set pricing and priority. The waterfall is very inefficient and doesn’t allow for real-time bidding,” said Brian Fitzgerald, president/co-founder, Evolve Media. “Header bidding is something that has become important to the ecosystem and valuable to publishers,” he said.

The reason Gawker Media does header bidding, in addition to its direct sales, is because it’s an opportunity to have a more sophisticated offering for advertising clients. “Header bidding is a response to [Google] AdX’s monopolization of the inventory,” said Eyal Ebel, vice president, programmatic, Gawker Media. But, it’s hard to implement. “It’s not running perfectly and it’s a consistent battle to optimize and tweak it,” Ebel said.

Fitzgerald noted that if Google -- which recently announced that it would make exchange bidding live in fourth-quarter or first-quarter 2017 -- does so, it will be a “game-changer.” He said Google actually had a product two or three years ago called Live CPM, but it got shelved. “The reality is, Google woke up and said ‘What are we doing?’ Are we really going to allow third-party demand to compete with AdX? Are we stupid?” Fitzgerald added that Google’s finally realizing that it’s going to be in a situation where it doesn’t control all the decisioning and JavaScript on the page.

“If Google does actually come through with server-to-server integration through APIs, all demand pricing will come in and there’s no header and no latency at all. In that scenario, everything would come straight into DFP [DoubleClick for Publishers],” Fitzgerald said. “Hopefully, we’ll continue to see improvement in header bidding implementation. We’ve seen a 20% to 25% increase in eCPMs (the advertising revenue generated per 1,000 impressions) from [Google’s] AdX. It is creating tension within AdX, and that’s good for all publishers.”

Tollestrup said all supply-side platforms have to decide to integrate.  “Header bidding shows us what people are willing to pay for our inventory, and sometimes it’s higher than direct sold inventory on a rate card.”

On the issue of programmatic competing with direct sales, Christtian Baesler, president, Bauer Xcel Media, said it’s a non-issue for his company because at the moment, in the U.S., Bauer doesn’t have a direct digital sales force. “The more we can move to header bidding, the better, because we see the highest CPMs by using it,” he said.

“We have great fill rates from direct sales, but header bidding is helping us maintain the highest CPMs,” said Andrew Budkofsky, EVP, Digital Trends. At hiis company, 85% of inventory is direct sold, while 15% is programmatic. “The reality for most of us, if we look at what we get through programmatic, it doesn’t begin to cover the content and audience acquisition costs, so we need direct sales.”

Washington Post’s Tollestrup said the questions to ask are: “How are your fill rates for programmatic? Are CPMs going up?”

Digital Trends’ Budkofsky said his CPMs are high, but when clients say they’re moving to programmatic, the fill rates aren’t so great.  “They say, ‘we want your audience, but then the fill rate is small. Then there’s something wrong”-- which adds to the complexity of header bidding. “We use header bidding to educate agencies on where CPMs are,” he added.

Gawker started in programmatic as a private marketplace-only (PMP) publisher, but by this year, it began to leverage the open market. “The fill rate is better now, and our commitment to spending in PMP deals is higher and more aggressive,” Ebel said.

Budkofsky’s fear is that header bidding can be seen as a “race to the bottom on the CPM side,” but on the flip side, it also places pressure to maintain high CPMs.

“The truth is, we’re making it up as we go along,” Ebel said. “Smart publishers will invest in content and help brands tell stories. That’s what we should be talking about.”