Innovations in Digital Advertising –– Impact, Cost Implications, and Best Practice Examples for Header Bidding

Dec 02, 2016

Introduction

Frost & Sullivan expects the US digital advertising market to be worth over $100 billion by the year 2022. A significant percentage of the forecasted ad spending will take place via programmatic technologies that allow automated execution of ad serving at scale. Header bidding is a programmatic technique which enables content publishers to offer inventory to multiple ad exchanges or supply side platforms (SSPs) simultaneously before making an ad call to their ad servers. In header bidding, the inventory is offered to ad exchanges or SSPs in a second price auction, and then winning bid is then passed into the publisher’s ad server to take part in yet another auction (that effectively runs like a first price auction).

Impact on Publishers

The impact of header bidding on increasing publisher yield is significant. With header bidding, every impression on a publisher’s site is now potentially biddable via programmatic channels, which increases publisher yield by allowing access to more demand sources. Traditionally, publishers have used the “waterfall” technique to monetize their remnant inventory. In the waterfall method, publishers “daisy-chain” (call out in sequence) demand sources such as ad exchanges and SSPs until the offered inventory is purchased. Publishers work with demand sources that offer the highest rates first, and in case the inventory is unsold, they move on to the next demand source that offers a lower price. Publishers using a waterfall strategy tend to prioritize a hand-sold deal, even if the exchange could deliver a higher price. 

Frost & Sullivan’s research suggests that SSPs and buying platform vendors have taken the lead in providing header bidding solutions. Most leading SSPs are deployed via the header. Tier-II SSPs are working on developing capabilities to provide header bidding solutions. Even though water falling is an acceptable practice, the process is complex and can lead to conflict of interests – especially when SSPs are involved in the waterfall process. The concept of header bidding is largely missing in mobile advertising. However, it is likely that the industry will see RTB demand sources compete with hand-sold deals in mobile as well.

Cost for Publishers

Open source header bidding solutions can be offered for “free”, while vendor-specific solutions typically come with a fee and include additional support, analytics, and other value add services. Publishers (and advertisers) also pay the SSP or the exchange fees for serving the ads.

The free header bidding tools in the market are typically header container solutions, which is similar to a specialized tag management system built specifically to allow the easy integration and ongoing management of multiple individual header bidding solutions. Examples of these solutions include offerings from AppNexus, Index Exchange, OpenX, AudienceScience, Criteo, Amazon, and others. 

When working with an open source header container, the publisher pays nothing for use of the open source container code; however, the publisher would still typically pay each of the above stated header “bidders” for the service of bringing demand.

The AudienceScience Approach

In the current digital ad environment, larger buyers and DSPs can participate directly at the header level. This reduces the cost for the buyer by removing the processing costs of duplicative impressions and eliminating the SSP fees. For example, AudienceScience, a leading provider of cloud-based enterprise advertising management systems, has operated its own proprietary header deployments for a number of years and currently has over 200 publishers globally using its header tag. This has a couple major benefits from customers:

  • AudienceScience does not charge the publishers for ads. Therefore, it eliminates the SSP/exchange fee for advertisers and publishers, which means lower costs for advertisers, more revenue for the publisher, and greater transparency all around.
  • AudienceScience’s approach reduces the need for user-matching with ad exchanges, which helps to deliver improved reach. An impression delivered via AudienceScience’s header solution always works off its proprietary user ID, which means that providers don’t have to worry about match rates like they would with third-party ad exchanges.

Conclusion

Header bidding remains an important technique in the digital advertising markets. It delivers significant improvements over the waterfall technique and helps to overcome the limitations of the traditional ad serving models. Innovative providers of header bidding solutions, such as AudienceScience, that offer global reach, integrated DMP functionality, and transparency are well equipped to drive future growth opportunities in digital advertising. To know more about the growth opportunities in the US digital advertising market, please read this Frost & Sullivan insight.            


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Vikrant Gandhi

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Fourteen years of product marketing, research, and consulting expertise, which includes supporting clients’ needs through more than 140 syndicated market research deliverables and consulting assignments. Particular expertise in Assessing next-generation telecommunications trends, technologies and market dynamics; Helping clients develop and execute their go-to-market strategies; Providing continuous inputs to clients into new market developments and helping them understand the strategic implications.


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