The Damming of Waterfalls: Why header bidding is in vogue with publishers

04/01/2016
Blog posted by Bill Swanson
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Bill Swanson, Vice President EMEA at PubMatic, explains why the traditional waterfalls approach is struggling to keep up with the demands of the industry.

The success of digital advertising, like all advertising, is reliant on publishers realising the full potential of their inventory. To do this, many publishers turned to ‘waterfalls,’ the methodology by which a publisher’s ad server calls on or requests all available demand sources one-by-one starting with those assigned the highest priority and continuing down until a demand source can fill the ad impression. This cascading down in a sequential order is what gave rise to the term ‘waterfall.’ However, the digital industry's waterfalls are fast drying out.

At the recent Ad Rev Europe conference in London, a group of senior publisher executives debated how publishers view the legacy waterfalling system. Ed Thomas, Head of Audience for Skimlinks, explained that, in his experience of working with publishers to identify lost revenue amounts due to the waterfall effect, losses were high—in some cases as much as 50%. 

The header bidding solution

In today’s digital media landscape, waterfalls—as graceful as they sound—are no longer efficient. In recent years, with the introduction of multiple sales channels, the complexity of the market has undermined the efficiency of the approach. The model ignores pockets of high-value inventory and reduces competition. It therefore artificially caps a publisher's revenue, resulting in a loss of control over their inventory and reduction in their revenue opportunity.

In a bid to achieve the highest possible yield through effective inventory monetisation, header bidding was created—a new, more efficient and sophisticated programmatic advertising technique.

While the understanding of the concept of header bidding is still in its infancy, put simply, it allows various demand sources to view the impression before it is sent to the ad server. This unifies all sales channels into one view, identifying which channel offers the highest CPM on an impression-by-impression basis, improving eCPMs and increasing fill.

This technique means that we are closer than ever to the dream of a unified auction, where demand sources compete side by side rather than in sequence, becoming a scalable reality.

Publishers who fail to utilise this new programmatic technique are potentially missing out on a large portion of untapped revenue. 

One partner to do it all

Interested publishers should prepare for the technical challenge of implementing header bidding by working with partners who offer the necessary expertise and support that enables them to configure their site in a way that maximises revenue while remaining optimal for user experience. 

By reducing the number of partners, not only will publishers benefit from the efficiency in the reduction of vendor management time, it will also reduce the potential latency effects of having multiple tags on their page. It is widely acknowledged that latency poses a significant risk to their user experience and increases the likelihood of ad blockers being applied to their sites.

A premium header bidding solution should also provide a robust set of controls for publishers to manage their monetisation across all channels, by maintaining control over CPMs and yield and ensuring proper pacing of guaranteed direct sold campaigns. This is extremely important for publishers as they need to fulfil their advertiser partners’ expectations of those guaranteed campaigns.

By partnering with one provider that can offer all of this across one platform, publishers can be confident in achieving their revenue goals without negatively impacting their audience’s experience.

Breaking the fall with header bidding

Header bidding stems from the acknowledgement between all parties involved in the digital publishing marketplace that more insight and transparency will increase efficiency in the ecosystem. For buyers, header bidding solves challenges around open access to a publisher’s optimum inventory, and, for publishers, it reduces revenue losses associated with ad server setups that reduce buyer competition.

From the get go, a successful header bidding strategy requires a clear understanding of the business’s programmatic and direct sales goals. A commercial team with strong yield and technical understanding will help, but more importantly, publishers who are seeking to utilise header bidding must ensure they do their due diligence in researching the right partner to implement the technology.

In closing, the reality is that header bidding is a tactic within a broader programmatic strategy. Its advantages in revenue optimisation may be highly attractive to publishers, but ultimately, moving towards a header bidding solution is about innovating beyond the inefficient status quo of a waterfall-focused advertising environment. Publishers should also understand that an effective header bidding solution must also be part of a holistic technology platform that provides ad serving, workflow automation, yield management and real-time analytics. Continued innovation towards holistic, data-driven technology platforms will drive growth for all stakeholders in the ad ecosystem.

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