• by Kyle Dozeman , Op-Ed Contributor, February 10, 2017

Header bidding has changed the structure of the digital advertising industry and, as a result, new things are possible. Today, buyers can use programmatic technology to achieve everything previously possible only with a traditional insertion order (IO). This, of course, was not always the case.

Evolving Header Bidding to The Biddable IO
The theory goes that header bidding provides buyers with the opportunity to buy 100% of a publisher’s inventory. In practice, however, if buyers were to move their IO budget over to RTB (real-time bidding) today without pricing and technology changes, it would result in higher fees, uncertain fill rates, and lower priorities in the publisher’s ad server.

In order to avoid these challenges, buyers will need their partners to evolve their offerings to provide pricing models that mirror those of the traditional IO, auctions that handle bids with guarantees intelligently, and priority within the publisher’s ad server—ultimately enabling what we like to call the “biddable IO.”

Step 1: Evolve Pricing.

With today’s IOs, publishers and buyers are charged transparent, predictable ad-serving fees by their respective ad servers. Thus, the technology cost of running a campaign can be known and accounted for by each party. In RTB environments, however, demand-side platforms (DSPs), agency trading desks and supply-side platforms (SSPs) charge programmatic fees that can diminish buying power. These fees sit on top of the ad-serving fees that publishers and buyers are already paying, thus acting as a deterrent to moving guaranteed IO budgets to the RTB channel. Programmatic vendors will need to demonstrate willingness to evolve their business models to allow for more transparent and predictable pricing for both buyers and sellers.

Step 2: Evolve the Auction.
In order to win an impression opportunity, buyers must compete in four different auctions: the DSP, SSP, wrapper solution, and publisher ad server. Today, we can use private marketplace (PMP) Deal IDs to override price and influence the winner of these auctions, but this becomes complicated if there are multiple Deal IDs associated with a guarantee in the same auction, raising the question of which bid should win.

For example, because SSPs don’t have the data to know how guaranteed campaigns are pacing, it’s impossible for their systems to choose the appropriate campaign or decide whether to send an open market bid instead. As the technology continues to evolve, DSPs, SSPs and wrapper-solution vendors will need to work collaboratively to provide buyers with a preferred access pipe capable of ensuring that all eligible bids associated with a guarantee make it through each auction and the publisher’s ad server can act as the central decision maker -- but that remains a way off yet.

Step 3: Evolve Priority.
There is a common misconception that header bids are in competition with traditional IOs. The truth is that nearly all publishers prioritize these bids to compete at the non-guaranteed priority level in their ad server; in other words, they’re only considered after traditional IOs. This can change, but buyers will need to work with publishers to negotiate Biddable IO campaigns to have line items that share the priority level of their traditional IOs.

Beyond Header Bidding
It’s time to evolve the conversation about header bidding beyond non-guaranteed yield. Header has created an opening for buyers to consolidate spend behind RTB and to maintain their ability to execute guarantees. To do that, DSPs, SSPs, and wrapper solution vendors will have to evolve their pricing and technology to fit buyers’ demands. Publishers will also need to work with buyers to enable RTB-based transactions to compete at priority levels previously reserved for their traditional IOs.

The future of the traditional IO is becoming increasingly uncertain. Those who evolve with the changing market dynamics will position themselves to gain significantly from that investment.