Waterfall

March 1, 2018
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Glossary

What is a waterfall?

In video advertising, “waterfall” refers to a common publisher technique for making as much money as possible out of available ad inventory. If the term is unfamiliar, you might have heard of it through its other names: “fallback,” “client-side mediation,” or “daisy-chaining.”

In waterfalling, publishers take their unsold ad impressions and run down a list of different potential buyers in turn. Each buyer snaps up the impressions they want, and publishers keep peddling any remaining impressions to the next ad networks on their list until, ideally, their ad inventory gets cleared out.

[image of publisher advertising priority stack]

Traditionally, waterfalling worked with separate ad networks. With the advent of supply-side platforms (SSPs), however, some publishers have taken to implementing waterfalls with these SSPs instead. We’ll examine how those methods work and how they differ in the next section.

How does waterfalling work?

The waterfall technique sprang up when separate ad networks were the norm in digital video advertising. To help publishers find the right buyers, these ad networks often had different niche targets: one network might collate ad inventory related to fitness, while another might specialize in travel. Likewise, within each niche, you’d get ad networks with different pay rates: some might focus on selling premium ad spots or impressions for sky-high prices, while others might compile and sell inexpensive inventory instead.

If a publisher had ad spots suited for reaching gym buffs, for example, their waterfall would use a list of fitness-focused ad networks. Those networks would typically be ranked according to their pay rates: highest pay rates sit on top of the list, lower pay rates nearer to the bottom. Sometimes, advertisers would also get top spots by cutting deals directly with the publisher’s sales team. The publisher would then take their ad inventory and offer it to the top ad network on that list. Whatever impressions were left over would get carried over to Ad Network #2, and so on, until the publisher stopped the waterfall or every impression in their ad inventory was sold.

[image of waterfall source chain with different pay rates]

With this setup, ideally, premium ad spots or impressions would get sold at premium rates. Since waterfalling automatically shifted unsold impressions to the next buyers in line, it also maximized the chances of selling all of a publisher’s available impressions.

How does that look, technology-wise? Simply put, you’d have a succession of VAST redirect tags. The video player would request an ad, and the top redirect tag from your waterfall list can fill in the spot with the corresponding advertiser’s material through a valid VAST response. If that first redirect tag doesn’t result in a fill, though, the video player calls in the next one, and so on down the waterfall until the process hits your specified redirect tag limit or an ad is successfully played.

[image of chained VAST redirects]

With the advent of header bidding, real-time bidding, supply-side platforms, and so on, that model has undergone significant changes. Many members of the industry have declared the end of the waterfalling technique. Our articles on programmatic advertising, real-time bidding, header bidding, and similar topics provide more details; in brief, though, today’s advertising landscape levels the old staggered ladder of the waterfall. Rather than offering available impressions one by one down a hierarchy of potential buyers, publishers can now offer every available impression to multiple buyers simultaneously and in real time.

[comparison of waterfall stack with simultaneous auctions]

That said, waterfalling hasn’t disappeared completely. Some publishers have continued using a modified version of the technique: rather than manually chaining potential ad sources/buyers, they waterfall supply-side platforms instead.

Recall how SSPs let publishers offer available impressions to a broad range of potential buyers in real-time. The thing about SSPs, though, is that their parameters for selling impressions can vary: one SSP can sell inventory at a higher “price floor,” i.e., the absolute minimum price a publisher will accept for a sale; different SSPs can offer distinct tools for managing ad inventory and overall publisher sales yield. Simply put, one SSP is not like another, and publishers who want to maximize revenue can conceivably work with multiple SSPs to increase their ad inventory’s chances of being sold at good rates.

In waterfalling SSPs, publishers first sell their available impressions on the SSP with the highest price floor. Remaining impressions then get pushed to a succession of SSPs with lower price floors until they get picked up or the publisher’s SSP queue ends.

What can waterfalling do for you?

At first glance, waterfalling looks more like a publisher concern. However, any advertiser looking to get their material out there at the best possible rates should have an understanding of the waterfall technique.

In practice, waterfalls aren’t as dead as the industry likes to say. As mentioned earlier, a kind of waterfalling persists even with programmatic advertising, thanks to publishers daisy-chaining supply-side platforms instead. A good number of publishers continue to implement waterfalls as a way to “backfill” or sell remnant impressions from their inventory, using the technique to complement other methods like header bidding. Some publishers, including big names like the BBC, The Washington Post, and The Financial Times, have refrained from jumping ship to newer methods altogether due to concerns like the complex technical demands and significant costs of reworking their advertising frameworks.

It’s clear that knowledge of waterfalling remains relevant — but what will it bring advertisers?

For one thing, it gives you a clearer picture of the opportunities you could have — or could be losing — when dealing with publishers who implement waterfalls.

In the case of traditional waterfalls, it all goes back to the staggered sales process. Your position on a publisher’s waterfall determines the quality of the impressions you get: the higher up you are, the more premium ad spots you can snap up, and theoretically, the more effective your campaigns will be. Having an idea of how waterfalling works helps you make better-informed decisions about how you allocate your resources, how you deal with particular publishers, and so on.

Second, knowledge of waterfalling means a better idea of how the technique can impact your ads’ performance. Latency is one example: since waterfalls comprise a sequence of video ad tags, each requiring at least a few seconds to process, you’re looking at the possibility of suboptimal ad serving times while the publisher works through each option in the chain. Delays can reach 30 seconds or more — sometimes even over a minute. The drop in user experience quality certainly won’t do your ad any favors.

Third, awareness of the SSP waterfalling practice can save you from some potentially bad deals when you’re shopping for impressions. The SSP waterfall means publishers offer the same impressions at increasingly lower price floors. In that system, you could unknowingly be paying higher rates for impressions that might eventually land in cheaper SSPs anyway.

Admittedly, publishers hold most of the cards when it comes to the waterfalling process, but a solid understanding of waterfalls boosts your ability to plan for and around this common industry practice when optimizing your ad rollout strategies.

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