March 21, 2016

Header bidding: What’s all the fuss?

Today in the world of programmatic, you can’t go a day without hearing the phrase “header bidding.” Suppliers want to implement it and buyers want to execute on it. But exactly what is it?

Most terms in the industry are easy to explain. Private marketplace, open auction, deal ID -- we all have a common understanding of what they are and how to use them. But header bidding? Put two ad tech professionals in a room and ask if they can explain it. You’ll find that you quickly fall down a rabbit hole of ad stacks, waterfalls, and yield optimizers (to name a few).

The reason header bidding has generated such a stir is because it enables:

1. Certain buyers to have a “first-look” at available impressions.
2. Publishers to expose their inventory to allow the market to determine its worth.

But how is it different from what we do today? Traditionally, publishers sell inventory using a waterfall setup, where impressions are exposed to sales channels in a descending order. In a normal waterfall setup, agency/client direct-buy inventory is sold first. Then, publishers allocate the remaining inventory to one or more exchanges.

Contrary to popular belief, the exchanges are chosen by using estimates and averages rather than an open auction model where several exchanges can bid on the available inventory to yield the highest revenue possible. Because the waterfall model holds back impressions from reaching their true value, publishers have become increasingly frustrated with it and have sought other solutions.

Header bidding circumvents the waterfall and goes straight to the buyers. To enable header bidding, publishers add code to their site’s pages which is read and bid on by demand sources before the ad server initiates the waterfall. When multiple exchanges are able to bid on the premium inventory, the prices of the inventory goes up, yielding higher revenue for the publisher. This process is not a final or even a long-term solution, but it does inch the industry closer to a true open auction marketplace.

As publishers and buyers continue to experiment with header bidding, its effectiveness and longevity will become clearer. At The Trade Desk, we remain vigilant in looking for the best opportunities to further the industry toward a true of an open exchange market and will continue to monitor header bidding. But for now, enjoy those cookie-rich impressions.