I tried to understand header bidding in programmatic advertising, but I hit a brick wall of incomprehension.

I got completely confused reading about how real-time bidding (RTB) works.

I understand the theory and the different components of the RTB ecosystem, but after reading countless articles it seems that the reality is a complete mess.

And a thoroughly Kafkaesque mess at that. Okay, this isn't exactly news, but I thought that rather than write about header bidding, it might be more interesting to write the story of a layman trying to understand it all.

This much I knew

Real-time bidding is the process of selling advertising space via an open ad exchange auction.

These open auctions are where publishers often sell their less valuable inventory, after the more sought after spots have been sold directly to preferred advertisers (through programmatic direct, private marketplaces or preferred deal).

For a simple explanation of real-time bidding and programmatic direct, you can check out Christopher Ratcliff's Beginners Guide.

Essentially, RTB allows advertisers to bid on different users (from pre-defined demographics) that pitch up at different types of web content. Successful bidders pay the second highest price (so they don't lose out if they bid far more than everyone else) and their adverts are served to the user.

This much, I knew. And it made sense to me.

Don't go chasing waterfalls

But when I tried to read up on the inefficiencies of RTB (which led to the development of header bidding), things started to get confusing.

Lots of people seemed to mention an inefficient waterfall process, whereby unsold inventory is offered by the ad server to one ad exchange after another, the top-ranked one first (estimating what the exchange can bring in), then passed down to lower ranked exchanges if the inventory is not sold.

This ranking of so-called 'demand sources' is apparently one of the problems with traditional RTB. This ranking doesn't take real-time demand into account, so the low-ranked exchanges, though perhaps smaller, may have stumped up a higher bid (and so publishers lose out).

Google's Doubleclick for Publishers is a commonly used ad server, which gives priority to (surprise, surprise) Google's ad exchange, AdX, which can pip other bidders.

Conceptually, I understand this, but then I thought, what about supplier side platforms (SSPs), where do they come in?

But what about SSPs?

It was my understanding that SSPs were designed to offer publisher inventory to multiple ad exchanges and provide tools with which they can optimise their yield.

SSPs are meant to make everything easier. So, why all this waterfalling and inefficiency?

I delved into definitions and more theories and found that publishers not only have waterfalls of ad exchanges, but they waterfall SSPs, too.

This seems like complicated madness. Publishers push inventory through their first SSP at a high price, dropping the price if it doesn't sell and pushing through the next SSP.

Aside from the publisher-side headache of cascading bids through these multiple SSPs (which were supposed to simplify things), there's the slightly dubious idea that the exact same inventory is priced differently depending on where an advertiser buys it.

If I'm honest, at this point I was still a bit confused about what was an SSP and what was an ad exchange. SSPs are routinely referred to as 'demand sources' (I thought they were for selling?) and I had to do plenty of Googling to find out how certain platforms are described.

As those in the know will tell you, there is now little differentiation between SSPs and ad exchanges. They both aggregate inventory, but the difference is that SSPs should put more focus on publisher value.

However, each adtech platform out there has sought to add functionality, meaning that SSPs and ad exchanges are almost the same thing. Ad exchanges included SSP functionality - Google's ad exchange did this back in 2011 (rolling SSP Admeld into its platform).

So, the bottom line is that SSPs are just like ad exchanges, and they don't offer complete access to the market, because all the different SSPs are competing and want to protect their demand sources, which fragments everything.

Hang on, you still haven't told us what header bidding is!?

Header bidding is some extra JavaScript that allows buyers and ad exchanges to submit their bids before page load, hence before the ad server is called.

So, all the bids come in at the same time and this can mean a higher price is achieved. The publishers can even let the open exchange beat a direct-sold impression, if the price fits. 

There's a debate about whether header bidding decreases or increases latency - its advocates say that because all bids come in at the same time, there's less chance of a time-out (when the publisher would fill the spot with its own internal ads).

However, others think header bidding increases complexity and also latency (notably Google, which doesn't exactly stand to benefit from header bidding, given it breaks the dominance of AdX).

Google is fighting back though

Google has rolled out First Look as its own attempt to solve the same problem as header bidding does.

Publishers using the Doubleclick ad server can use its Dynamic Allocation tool to see in real-time how much media buyers within the Google ecosystem are willing to pay for an impression.

What's my overall feeling after such a nightmare?

SSPs should talk to each other, but they don't and that's a problem for publishers who want to make the most of their inventory.

Some very brief thoughts on my nightmare:

  1. Why aren't adtech companies better at explaining what they are and how the process works? Perhaps they don't want to confuse people.
  2. I realise that the internet isn't really a democracy, but until some of these processes are replaced by a more elegant solution, doesn't the complexity mean that bad practices take longer to come to light?
  3. How can we expect fraud and viewability to be tackled without greater integration?
  4. There's a skills shortage in programmatic - the industry needs to get better at explaining all this stuff.
  5. No wonder publishers are investigating bespoke and native formats.

A big caveat: My knowledge is limited. That's the whole point of this article. If, reader, you find any errors in what I have written above, please set me straight in the comments below.

For more on this topic, check out these Econsultancy resources:

Ben Davis

Published 12 January, 2017 by Ben Davis @ Econsultancy

Ben Davis is Deputy Editor at Econsultancy. He lives in Manchester, England. You can contact him at ben.davis@econsultancy.com, follow at @herrhuld or connect via LinkedIn.

1085 more posts from this author

Comments (3)

Kenneth Teh

Kenneth Teh, Investment Associate at Fast-Track

I think you've just gotten your first taste of the complicated mess that is AdTech! In a fragmented industry, there's a lot of competition in overlapping niches, and those points of overlap tend to generate a mismatch in definitions. So you'll find that a lot of debates aren't true debates because each side simply defines their argument differently in order to market their product - in short, they DO want to confuse people, because confused people are easy to sell to.

In general, the complexity in terminology comes from a couple of sources:

1) Ad Tech IS complicated.

2)Buzz words:
i) Market entrants have to choose to associate with buzz words so that others in the ecosystem understand them.
ii) Even when their technology doesn't allow them to perform a certain function necessary to the definition, they have to include it just to compete in the same space (see DSPANs in China).

Oh, and if this is helpful, I pasted in my own notes on Header Bidding:

Header Bidding
Before, publishers have managed their programmatic yield by daisy chaining sources in a waterfall structure: Publishers offer impressions in one sales channel, and if buyers don’t bite, they push them down to other, less valuable channels until someone makes a bid.

Side note on why SSPs don't currently maximize yield
Problem with SSPs: each SSP only has access to some demand sources

Enter header bidding
Header bidding, also known as advance bidding or pre-bidding, is an advanced programmatic technique wherein publishers offer inventory to multiple ad exchanges simultaneously before making calls to their ad servers (mostly DoubleClick for Publishers). The idea is that by letting multiple demand sources bid on the same inventory at the same time, publishers increase their yield and make more money.

Header Bidding: combining their inventory into a single server-side supply

The website publisher places some JavaScript in the website’s header. When a page on the site is loaded, the code reaches out to the supported ad exchanges or supply side platforms (SSPs) for bids before its own ad server’s direct sales are called. Bidding is essentially simultaneous, instead of sequential, and focuses on all available impressions, not just the ones available after direct sales.

If they want, publishers can also allow the winning bid to compete with the prices available from the direct-sold ads.

Problems with Header Bidding
Beyond being a complicated setup to implement, the biggest issue with header bidding is what it can do to publishers’ page load times.

Traditional SSPs are losing out
Rubicon is struggling while other SSPs are benefiting because of its business model. It initially signed premium publishers
to 18-month contracts guaranteeing that Rubicon would see most of the publishers’ impressions. Competing SSPs would get leftovers in a waterfall-style setup.

With the rise of header bidding, SSPs may evolve so much they no longer resemble SSPs. To differentiate themselves, some may look to automating orders. OpenX and Rubicon Project are in that camp, for example.

Basically
1. Without header bidding
a. Adserver receives call
b. First direct sales are called
c. Remnant spots are passed through programmatic waterfall of SSPs/exchanges
2. With header bidding,
a. Adserver receives call
b. Bids are simultaneously solicited programmatically

http://digiday.com/publishers/wtf-header-bidding/
http://marketingland.com/martech-landscape-what-is-header-bidding-and-why-should-publishers-care-157065

Google and Header Bidding

Direct Sales tend to be higher yielding, but publishers were able to sell some inventory through Google's Dynamic Allocation at higher prices
Most of the time, in-house sales forces sell ads at a higher price than ads sold programmatically (using ad tech to make the buying process automated.) However, there are occasions when ad tech can win out because they use cookies to build profiles on users based on their browsing behavior.

Users that have previously been searching for vacations in Barbados are hugely valuable to travel companies, who are willing to bid a lot of money to serve ads to them. But a publisher’s salesforce might not even know they have been visiting the site.

That’s where ad tech can win. And publishers win too, because they sell their ads at a higher price. The problem for ad tech, when it came to DFP, was that only Google’s AdX was being able to compete with the internal sales-forces for those audiences. Google’s AdX didn’t let outside companies enter bids for those impressions. Everyone else had to wait for a slot that became available after the direct deals were sold.

Ad tech companies figured out a workaround. They asked publishers to insert a special piece of code into the header of their web pages that sent out the ad request before Google’s DFP could take a look. (Header Bidding)

Now, Google has opened up Dynamic Allocation to other (reputable) exchanges/demand sources. This means that publishers can now open bidding to multiple sources without a header bidder. (April 2016)

Read more at http://www.businessinsider.sg/header-bidding-was-the-latest-trend-in-ad-tech-designed-to-take-on-google-now-google-has-effectively-stamped-it-out-2016-4/#64yv15KeBhAYS0M2.99

8 months ago

Ben Davis

Ben Davis, Deputy Editor at EconsultancyStaff

Thanks Kenneth. Think your own notes cover the same ground as my article, but I loved your opening gambit about confusion in the adtech world. Thanks for commenting.

8 months ago

Avatar-blank-50x50

Matt Lovell, Head of Customer Insight at Jack Wills

I'm completely with Kenneth on his point that "in short, they DO want to confuse people, because confused people are easy to sell to." Unfortunately from my perspective, this is one of the biggest problems with Programmatic.

Yes there are technical complications and competing parties are making live difficult but not working together or in an aligned way however the bigger issue is that most of the people within the programmatic world appreciate that the outputs of their efforts don't work that effectively (in much the same way as any other online display activity) - hence the easiest way to convince clients it's essential to them is over complicate it and ensure that there is a belief that it's the complicated nature of the beast that makes it work so well!

8 months ago

Comment
No-profile-pic
Save or Cancel
Daily_pulse_signup_wide

Enjoying this article?

Get more just like this, delivered to your inbox.

Keep up to date with the latest analysis, inspiration and learning from the Econsultancy blog with our free Digital Pulse newsletter. You will receive a hand-picked digest of the latest and greatest articles, as well as snippets of new market data, best practice guides and trends research.