Header bidding: What marketers need to know
What is header bidding, and how does it work? Columnist Ratko Vidakovic gets into the nitty-gritty of header bidding and explains the benefits for advertisers.
In previous articles, we navigated the digital display advertising “stack,” starting with direct orders, programmatic direct, private marketplaces and the open RTB (real-time bidding) auction.
Since writing that series, a new ad technology known as “header bidding” has grown in adoption by publishers. Because of its transformative impact to the programmatic advertising ecosystem, it’s also become a popular topic of discussion within the industry.
Yet when I ask industry associates how much they know about it, most reply “very little.”
What is header bidding, and how does it work?
If the concept of header bidding is new to you, I suggest starting with this beginner’s guide to header bidding. In this article, however, we will dive deeper into what header bidding means for marketers and how to take advantage of it.
To explain header bidding in a nutshell, let’s borrow the following definition from that guide:
[blockquote]Header bidding is a new, unified auction conducted by publishers outside of their primary ad server, which allows advertisers to cherry-pick impressions at the highest priority using programmatic ad platforms.[/blockquote]
If that sounds too abstract or conceptual, have a look at the following illustration that shows what this new auction looks like:
It’s different from traditional real-time bidding (RTB) auctions because instead of each ad exchange having their own auction, one at a time, at a much lower priority in the publisher’s ad server, header bidding allows all the ad exchanges to bid at the same time at the highest priority in the ad server.
This means far more premium inventory is now available to marketers programmatically.
As for publishers, the increased competition translates into more revenue for them. Which is important in creating a sustainable advertising ecosystem.
Regarding the second part of this definition (“allowing advertisers to cherry-pick impressions at the highest priority using programmatic ad platforms”), there are two important caveats. Advertisers will only win impressions in the header auction if:
- the bids are high enough, and
- they don’t disrupt the delivery pacing of direct orders.
In other words, to get the privilege of cherry-picking impressions at the highest priority in a publisher’s ad server, the price will need to be higher.
Now, as a marketer, you might be wondering what is so great about winning impressions at the highest priority. That’s what I’ll now cover: the benefits of header bidding for advertisers.
Access to ‘premium’ inventory, programmatically
When RTB first came on the scene (circa 2009–2010), it had a negative reputation. Because it was mostly unsold inventory being traded, it had negative connotations associated with low quality (e.g., remnant, or unsold stuff nobody else wanted). There were even clever redefinitions of RTB, such as “race to the bottom,” that industry critics liked to toss around.
In some ways, this was true. Most RTB inventory was only available at the bottom of the ad-serving waterfall, so the session depths were lower (i.e., it was more of a later look at inventory).
But this was a result of how publishers chose to implement their supply-side platform (SSP) partners in their ad servers. Instead of using their SSPs the way the SSPs wanted to be used — as the primary ad server for the publisher — publishers relegated them to line items at the bottom of the ad server.
With header bidding, RTB or programmatic buyers can now have a first look at inventory, even above direct orders, which is a giant leap in the evolution of ad serving.
‘First look’ as a premium benefit
In previous articles, I covered the concept of session depth to help define what “premium” means in a display advertising context. Often, there seems to be an implicit premium that’s associated with earlier impressions, and rightly so. As a result of header bidding, these earlier impressions are now available to programmatic buyers.
For example, if you go to CNN.com, and you are hit with that first advertisement, that first ad is considered higher value than, let’s say, the 15th page view. Why? First, there’s no guarantee that anyone is even going to get to 15 page views deep on any given website.
It’s like a long-tail graph, where almost every single visitor who visits the website is going to view at least one page. A high percentage are also going to view at least two pages. But then it drops off significantly after that, generally speaking. (Some types of websites, like discussion forums, have a higher number of average page views per visitor.)
If you want to maximize your reach of a publisher’s audience, you want to ensure that your ad is seen during that first or second page view (i.e., the earliest session depth). This is especially important when doing retargeting campaigns.
To retarget everyone in your audience, you want to “see” a publisher’s entire audience. That’s what drives the premium price.
If you want to use an analogy, you can think of it like a conference or a trade show floor. There’s a premium price tag placed on booths that are closer to the entrance, because they benefit from the most traffic. Everyone is going to see those booths. But the booth that’s tucked away in the back corner, for example, is probably going to get much less foot traffic and reach of the overall audience. It’s similar with page views.
With header bidding, the reason you can see more inventory is that the header auction happens before everything else. It happens before the direct orders are even served. Because of that, it has those characteristics of being that first booth, right by the entrance.
That’s why advertisers covet the ability to have that first look. That’s why they’re bidding more for it, and that’s why they will continue to bid more for it.
How to access the header bidding auction
As a marketer, the first step to buying ad inventory from header auctions is to use a demand-side platform (DSP). Once you have a DSP to execute your campaigns, the next step is to find publishers that support header bidding.
Let’s assume you have a list of high-value publishers. This list can include publishers you have existing private marketplace deals with. Or it can be publishers that perform exceptionally well in your current campaigns. Either way, you need to start with a list of publishers that are valuable to you.
Once you have that list, the next step is to install Headerbid Expert for Chrome. This plugin will show you all the demand partners that a publisher uses in their header bidding implementation, if any.
Here is an example from weather.com:
With this information, you now know that as long as your DSP has an integration with AppNexus, Index or Rubicon, you should be able to bid inventory in the header auction. Alternatively, you could also go direct to some of the retargeting companies listed, such as Criteo or Amazon. But for the purpose of our example, let’s say you choose to bid through your DSP.
One of the unfortunate aspects of programmatic buying is that with a DSP, there is currently no transparency into the session depth of an impression. That makes it hard for advertisers to know whether they’re bidding on header impressions or not. That might change in the future, but for now, that information is not available.
That said, there are two approaches for bidding on header auction impressions.
First, you can bid very high and hope that you win impressions from header auctions. But as Vince Lombardi said, “Hope is not a strategy.”
The second, more certain method to access the header auction is to approach publishers directly in an effort to secure a private marketplace deal for those privileged impressions.
If you recall, private marketplaces are considered privileged auctions that happen at the highest priority in the RTB ecosystem. For bigger, more attractive publishers, who understand the value of their inventory, they will almost certainly keep it protected in a private marketplace, making it necessary to establish a deal with them to access it.
The process of establishing a “deal ID” with a publisher is beyond the scope of this article. But in short, you can do so either by approaching the publisher’s sales team directly or by asking your DSP account rep to help you establish it.
(I fully understand the irony of having to manually reach out to a publisher to execute a media buy programmatically, but such is the nature of accessing privileged inventory.)
The end result of establishing a private marketplace deal with a publisher is a “deal ID,” which is then used in your campaigns to access this high-priority inventory from the header auction.
Header bidding will accelerate programmatic advertising
Header bidding is the most important advancement in ad tech since the introduction of real-time bidding. In the early days of RTB, publishers were hesitant to adopt it. They feared it would cannibalize their direct sales or introduce downward pricing pressure, which impeded the adoption of programmatic ad technology.
As a result, marketers only had programmatic access to a fraction of ad inventory from publishers.
But now, because of the revenue benefits publishers are realizing from header bidding, and the premium inventory now available to advertisers, programmatic advertising is finally able to shake off the reputation of being a low-quality, direct-response channel. Consequently, adoption of programmatic advertising is likely to accelerate among publishers and marketers.
Opinions expressed in this article are those of the guest author and not necessarily MarTech. Staff authors are listed here.