• by Julius Ramirez , Op-Ed Contributor, June 13, 2016

Header bidding is an ad-tech hot topic. As of November, 53% of large publishers were using the technique, according to OpenX. It’s no wonder why: by at least one estimate, header ad rates beat standard waterfall rates by 166% in open exchanges, per Index Exchange data.

While header bidding is clearly good for publishers, the benefit for advertisers isn’t as clear. Issues such as lack of transparency and standardization make it hard for advertisers (and demand-side platforms) to get an accurate read on opportunities. The situation will likely be sorted out over the next year, but in the meantime, marketers should arm themselves with facts on the technology.

The Issues Presented

Header bidding isn’t a replacement for the waterfall. It’s another way to help publishers maximize yield and opportunity. For buyers, there’s potential that header bidding could provide transparency similar to that afforded through direct-sold inventory. However, unless there’s visibility and access to the full transaction process (ad server, supply/publisher, demand-side platforms and demand), this level of transparency generally won’t be available.  

Header bidding solves a problem for publishers, but introduces opacity for the demand side (the buyers and their buying partners) in terms of optimization, effective bidding and performance attribution. In other words, it’s harder for advertisers to take advantage of inventory appropriately.

For instance, I can bid on an impression, but that doesn’t mean I am eligible to purchase that impression. A publisher can decide for whatever reason that it doesn’t want to accept the bid. As a bidder, I’m not privy to the reasoning behind that decision. As a result, I could be eligible to compete with higher priority positions within the publisher ad server one day — but the next hour or minute, the publisher can drop me in priority, and my eligibility to bid on those impressions is no longer there.

Another issue is the inability to effectively optimize header impressions. Today, there are no standardized identifiers signaling demand sources that impressions are from header implementations.

The Necessary Fixes

There are two ways the system could be improved: standardization and transparency. The Interactive Advertising Bureau's Joe Laszlo recently said the organization is looking into a standard for signifiers within a bid request.

Header-bidding solutions from third parties are all based on proprietary technology. Some are interested in introducing their own custom signifiers, but that approach isn’t scalable when you’re operating in an ecosystem with more than 35 global exchanges and supplier-side platforms. With standardized technology, buyers can optimize impressions appropriately and capitalize on those opportunities.

Beyond standardization, I’d like to see an ecosystem in which publishers and suppliers tell us where we sit within the publisher ad server. If it dynamically changes, fine. Publishers should have control. But advertisers should also have more clarity so they can bid appropriately on supply.

Addressing those issues should help make the process more scalable and efficient. However, header bidding will still require further development for buyers to extract its full potential. As of today, header bidding should be viewed as an option for additional access to supply, but not an anchor to a buyer’s strategy.