Header bidding is a technique that enables publishers to sell inventory to multiple ad exchanges at the same time before calls to ad servers are made. Everyone in the ad tech world uses header bidding, but why is it so important? How does it boost ad revenue? To answer these questions, we must first look at how ad inventory was bought and sold before header bidding came into the mix.
The Waterfall System
Before header bidding, publishers sold ad inventory through a process called the waterfall system. The system was set up so that ad networks (or ad exchanges) were arranged top-to-bottom based on their yield performance. The first network was given a chance to place a bid for an impression while the webpage loads. If the network, however, did not exceed the publisher’s price floor, then the next network was called upon to bid until a winning bid was submitted.
But this system had a major flaw.
Advertisers who might potentially make the highest bid were unable to do so if a winning bid had already been submitted from a higher tier in the waterfall. For example, let’s say the publisher’s price floor was set at $2.00, and Network 1 placed a bid for $2.01. This would be the winning bid, despite the fact that Network 3 may have placed a much higher bid of $3.00. This meant that publishers were missing out on revenue since there was always a chance that the winning bid was not necessarily the highest-paying bid.
How Does Header Bidding Work?
Header bidding solves this issue by bringing all demand sources together so they can bid simultaneously in real-time before calls to the ad servers are made. This levels the playing field for advertisers by giving them an equal chance at winning an ad inventory bid. This increase in competition also benefits publishers. Since they don’t have to rely on a single SSP (Supply-Side Platform) bid, they can increase their overall yield and make more money.
Since the header script is an HTML element that tells the browser how to render the page, header bidding occurs before the page is loaded. The bidding code calls demand partners, who simultaneously bid on an impression. The highest bid from each demand partner is then passed from the visitor’s browser to the publisher’s ad server before its own direct inventory is called. This entire process takes less than a second.
Why Is Header Bidding Great for Publishers?
Here are some reasons why you should implement header bidding on your site:
- Increased competition. With header bidding, your ad inventory is available to more advertisers, increasing CPMs, and driving revenue growth.
- Diversify advertisers. With more advertisers bidding for your impressions, you are no longer reliant on a small group of advertisers. This increases your business’s resilience by decreasing your risk.
- Better ad quality. More competition means that advertisers with higher quality and relevant ads will bid higher to get their ads in front of your audience.
- Faster loading times. Header bidding decreases the time it takes to sell an impression and load an ad on your page, improving user experience (and SEO results!).