Header Bidding

April 2, 2018
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Glossary

What is Header Bidding?

Header bidding is a programmatic advertising technique that has multiple advertisers simultaneously bidding for a publisher’s ad inventory through a single, unified auction. Also known as pre-bidding or advance bidding, this technique has grown in popularity due to benefits like increased advertiser access to premium inventory and boosts in publisher revenue.

Header bidding takes its name from the header element of a webpage’s HTML: this section of code tells the user’s browser how to render a page, and it typically loads first. In advertising, header bidding starts with a piece of Javascript code embedded in the webpage’s header, which fires up once a page starts loading. The ensuing ad inventory auction does away with the availability hierarchy that characterizes typical waterfalls. (For more on waterfalls, check out our glossary entry [Link: glossary entry on waterfalls].)

[image: header bidding diagram 1]

The technique first made waves in 2015, especially in the display advertising industry. Since then, header bidding has crept into video advertisers’ vocabulary as well, though technical issues and the unique qualities of video ads still pose barriers to widespread header bidding use.

How does header bidding work?

There are two things to understand off the bat:

  • Header bidding tries to improve on the “stacked” or daisy-chained access hierarchies often seen in the process of selling ad inventory.
  • Due to the nature of video ads, especially in comparison to display ads, header bidding for video involves different technical mechanics and challenges.

What is header bidding trying to solve?

First, recall the typical advertising waterfall. [Link: glossary entry on waterfalls] In that setup, the bidding process for ad inventory starts when a publisher taps on its ad server. At that point, the publisher offers ad inventory to buyers one at a time, with decreasing prices, until all impressions are sold. At each rung of the waterfall, the buyer (e.g., an ad exchange, SSP, advertiser, etc.) bids, or runs an auction for, the available impressions.

In this system, publishers’ revenues dwindled with every push of inventory down the waterfall. Impressions that went farther along the waterfall were also less likely to get picked up since they had already been rejected by other advertisers. Meanwhile, the impressions that advertisers could access depended on their perceived value, i.e., their position on the waterfall. The lower an advertiser’s rung, the lower the quality of impressions they were likely to get. On the whole, the system itself proved inefficient, often requiring a succession of auctions and operations at every step of the waterfall before an ad was served.

Header bidding tries to optimize the process for everybody involved by ditching the waterfall hierarchy.

What does the process look like?

The basic process of header bidding looks like this:

[image: header bidding diagram 2]

  1. When a user’s browser loads a page, it triggers the Javascript code that starts the header bidding process. That code alerts all the page’s “demand partners” — that is, all potential buyers — that an impression is up for grabs.
  2. Since many of these buyers are exchanges, SSPs, or other collections of different advertisers, they hold their own real-time auctions to find their top bid.
  3. Each buyer sends in its top bid.
  4. Each bid may then be relayed to the ad server, or only the highest of the buyers’ bids gets sent to the ad server.
  5. Either way, the ad server then judges the relayed header bid/s against other existing demand sources (e.g., direct ad sales, internal ads, etc.). The winning bid then gets the ad slot.

Depending on publisher preference, the header bidding process may be:

  • Mediated: Only the top bid from all participants gets relayed to the ad server.
  • Non-mediated: Each bid from each participant gets relayed to the ad server.

This whole auction process occurs for every available ad slot on the page. That means that when a user loads a page, a publisher can have multiple header bidding processes taking place; likewise, a buyer can participate in auctions for different ad slots simultaneously.

What makes video ads different?

While header bidding took the display advertising world by storm as early as 2015, video advertising hasn’t been as quick to take up the technique. Several factors are at play:

  • Video ads have larger file sizes and more complex formats than typical display ads.
  • Video advertising doesn’t have headers — instead, there are video players.
  • Video players often use a variety of technologies, including proprietary ones.

First, video ads have unique qualities that require tweaks to the basic header bidding process. While display ads can be lightweight enough to be handled by the user’s browser from header-embedded code, for example, videos don’t have the same luxury. Efficiency and performance can quickly take hits when the header bidding process doesn’t adjust to video’s higher technical demands.

That’s why you’ll frequently see talk of server-side header bidding.

Essentially, a separate server provides an extra processing layer between bidder partners and the user’s browser. Instead of the embedded JavaScript code doing the heavy lifting of managing the whole process, it simply passes the load onto the separate “mediator” server. This server then carries the burden of conducting the header bidding process.

[image: header bidding diagram 3]

Second, let’s dig a bit deeper into how header bidding’s backend mechanics change for video ads.

Unlike display ads, which appear when a page loads and are light enough to be cached in a webpage’s header code, video ads require a user to hit play on a video player before any bidding occurs. That same video player carries the code that does what header codes do for display ads.

At this point, it’s worth noting that header bidding code, regardless of where it’s placed, uses JavaScript. With as much as 90% of digital video players still using Flash in 2016 [see VPAID article for link], many industry members resort to technical workarounds to implement header bidding. Examples include adding header codes to their video players or incorporating the header bidding logic within the video player itself.

That brings us to our last point: with video player technologies varying across platforms, the workarounds used to implement header bidding also differ in specifics. While the basic flow of operations remains the same, the technical details of that workflow will often vary.

What Can Header Bidding Do for You?

Header bidding’s biggest advantage for advertisers is access to premium inventory. In the standard waterfall setup, advertisers didn’t get to bid for a publisher’s premium impressions, let alone see their whole ad inventory, unless they cut a direct deal or ranked high enough on the waterfall queue. With header bidding, advertisers get to see a publisher’s inventory even ahead of direct orders, giving them better choices to work with. Advertisers can now take their pick of a publisher’s inventory at the highest priority.

At the same time, advertisers can bid in several channels — that is, for several different impressions — at once. This increases the chances of landing ad space on a valuable webpage.

Publishers, meanwhile, gain the benefit of higher yields for their ad inventory. Since buyers now compete in a unified, real-time auction, publishers no longer have to shop their remnant inventory around at deprecated values. The real-time bids from all of the publisher’s potential buyers ensures that impressions get sold at the best available price that the field can offer, with the impression’s value determined in a more efficient way.

Unsurprisingly, some video ad publishers have reported revenue increases of around 25% in initial tests. This is consistent with header bidding’s success in display ad publishing, where people have reported revenue increases ranging from 30% to 60%. In the long run, these revenue improvements encourage more business from publishers, making for a healthier advertising industry overall.

However, the benefits of header bidding should be weighed against the disadvantages that come with the technique.

The Issue with Header Bidding

You might have noted that increased revenue for publishers implies higher costs for advertisers. Broadly speaking, that’s true: since you’re on the same playing field as all other potential buyers, success in header bidding auctions requires high bids. Similarly, since stuffing a webpage’s header with too many buyer calls slows down a user’s browser, publishers are often looking to cut potential buyers who can’t offer consistently competitive bids. Advertisers who can’t keep up can just as quickly lose access to the header auction altogether.

Plus, as noted earlier, video ads present distinct technical challenges for widespread header bidding implementation. To handle the load of multiple simultaneous auctions, sizable video files, and so on, publishers, exchanges, header bidding service providers, and other parties need to funnel massive amounts into infrastructure improvements. From switching to JavaScript video players to acquiring distinct header bidding mediation servers or building custom ad management platforms, committing to the use of header bidding can come with hefty labor and financial tolls.

The demands of header bidding can also weigh down overall ad serving performance and, by extension, the user’s experience.

For example, latency issues plague header bidding, especially with video ads. Since bidding only takes place when the video player initializes, the systems involved will have to handle multiple strenuous processes at once: complex header bidding auctions, loading up actual video ads, and downloading the video content that the ads are accompanying. If VPAID tags and more complex formats (like 360 video or interactive ads) are involved, buffering times can quickly become unbearable.

Viewers close or abandon pages with sluggish video players, and publishers and advertisers alike suffer significant losses as a result.

Despite all the buzz surrounding header bidding, various factors have kept it from building considerable momentum in video advertising circles. Some industry members have described it as a necessary but unwieldy “hack,” noting the need for better tools to manage ad inventory sales. Others have questioned the viability of header bidding for video ads, where quality views remain scarce. Still, others are trying to develop the technology, infrastructure, and practices needed to solve video header bidding’s issues and foster industry-wide adoption. Which camps will succeed, and what impact header bidding will have on video advertising in particular, remains to be seen.

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