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ROXOT BLOG

Header Bidding Essentials

A short, straight-forward explanation of how header bidding works, why it emerged, and what to know when considering it.
What exactly is header bidding?

Header bidding is a new method of integrating demand partners (ad exchanges, supply-side platforms, ad networks, etc.) that allows publishers to offer their inventory to multiple demand sources simultaneously.
The entire header bidding process runs on the client side - user's browser - with a publisher placed JavaScript container with demand partners' adapters in the website's header. On each new visit, the container:
1
Sends an alert to multiple demand partners simultaneously indicating that you have an impression to fill
2
Fetches bids from the partners
3
Chooses the winner (the highest bid)
4
Sends information about the received bids to publisher's ad server with line items targeting header bidding parameters
Finally, a publisher's ad server (usually DoubleClick for Publishers by Google) either serves the winning partner's ad or gives the impression to Google's AdX in case the publisher enabled Dynamic Allocation and AdX beats the winning bid.
Why header bidding emerged

Traditionally, publishers were forced to sell their inventory using a "waterfall" or "daisy chaining" method where requests were first sent to their primary demand partner; if the impression didn't get picked up, it was pushed to the second, third, etc. until the impression was filled. It was common practice for a publisher to use a single demand partner as the primary source of demand, and then fall back on others to make the most out of unsold impressions. Publishers usually worked with the network that historically showed the highest CPMs before working with those that offered lower rates until they monetized every impression.
The traditional waterfall method has multiple downsides:

- Publishers have to agree to work with one principal demand provider. Therefore, they are highly dependent on a single partner which increases the risk of lost revenue.
- The waterfall setup artificially caps publishers' revenue due to little competition for inventory.
- When the publisher's primary demand partner doesn't fill an impression, it's passed to the next partner, which significantly slows down the website with latency issues.
Header Bidding Advantages

The header bidding technique was developed as a single unified auction where demand sources compete side by side, ultimately yielding higher CPMs and fill rates. With header bidding, publishers:
1
Increase website revenue by letting the highest CPM on the market win
2
See the true market value of their inventory
3
Reduce risks of undervaluing their inventory as there is no need to rely on a sole demand provider
4
Reduce the latency compared to passbacks of the waterfall structure (in theory)
Header Bidding Disadvantages

Header bidding is a technical solution and complex to implement correctly. It requires advanced adops skills and other resources such as time and manpower. If incorrectly set up, header bidding can cause publishers to risk losing revenue, loyal website visitors, and because ad auctions run in web browsers, exposing valuable data. Beyond these downsides, the biggest issue with header bidding is an increase in page loading times. Despite expectations that it would kill the latency issues caused by the waterfall strategy, publishers have reported that header bidding makes the situation even worse - each partner tag that a publisher plugs into its page is yet another potential source delay.

Finally, although header bidding was the most crazed adtech topic of 2016, it is still an emerging technology. There are a limited number of demand providers who integrate via header bidding. Publishers with traffic from regions other than United States and Europe might have difficulties finding enough demand for header bidding to be a viable strategy.

Conclusion

Header bidding is in many ways a better way to sell publishers' inventory: it flattens the waterfall, increases competition for each impression, and as a result, boosts website revenue. On the other hand, it's less than ideal: it requires significant time and manpower investments to implement and may damage user experience on websites due to latency issues. Publishers risk losing revenue and website visitors if they don't have enough expertise.
Thus, header bidding might be more suitable for experienced publishers with a decent amount of traffic as they will see the most dramatic difference in the performance of their monetization strategy.

About Roxot

Roxot is a header bidding solution. We are an official partner of prebid.js, one of the most popular header bidding frameworks.
Our machine-learning algorithm analyzes incoming data about visitors, content, bids, ad placements, and networks/exchanges. It adapts to and understands what's hot in the market, providing actionable insights into what's getting the most revenue and automatically pricing each impression with dynamic price floors. We partner with the same ad exchanges and networks that you may already use. But with Roxot optimizing the mechanics, you generate higher revenue for most impressions. Thanks to header bidding, you no longer risk your revenue; the highest bid always wins.

Learn more about how it works here.

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