The battle between Waterfalling and Header bidding in today’s programmatic advertising landscape
The advent of technology has changed the way brands and agencies buy digital advertising placements on publications around the world. It is a human attention business where publishers strive to create valuable and newsworthy content on their digital assets, with the aim of attracting as many readers or eyeballs as possible. On the other hand, advertisers like brands and agencies bid to have their advertising banners and videos appear alongside the articles, videos or content of a variety of publishers.
Publishers are concerned with maximising yield (i.e. making as much revenue from the ads on their sites) while advertisers (brands or agencies) are more interested in attaining the best return on their spend Click To Tweet. In a nutshell, publishers are more interested in making the best revenue per thousand impressions (RPM) whilst advertisers are seeking the most efficient cost per thousand impressions (CPM), which also helps in the achievement of the marketing goals such as brand awareness, clicks to website, leads, online purchase or offline store visits. Waterfalling and Header bidding are two ways publishers auction their ad inventory to advertisers. We’ll look at both concepts in detail in the subsequent sections of this blog and see how they compare.
Publishers are always concerned with yield optimisation or, in layman terms, making the highest buck from advertisers. Have you ever watched popular property auction shows like Homes Under The Hammer? In Homes Under The Hammer, residential, commercial or plots of lands are auctioned to buyers who bid until the highest offer secures the property. The auction can carry on for a while depending on the number of interested buyers and bids and counter bids received. This could be likened to a Waterfalling auction process in programmatic advertising. Although, with Waterfalling, the unsold ad inventories (or properties in an auction show) are moved to other buying networks.
On the other hand, in the case of Header bidding, imagine a property auction programme where houses are simultaneously offered to a variety of auction houses at the same time. Assuming, we’ve got 5 buyers each in 10 separate property auction houses, the presenter can open the auction to all 10 property houses at the same time, which increases the poll of potential buyers interested in the property and will most likely increase the number and amount of bids received. At the end, the property is likely to sell for more with the Header bidding model, where a presenter links with multiple property auction houses at the same time rather than offering to just one auction house at a time and moving down the hierarchy of property houses. Waterfalling and Header bidding work in a similar fashion. Let’s get into the actual meanings of these concepts and how they impact the programmatic landscape.
So what is Waterfalling?
Waterfalling in this respect does not have anything to do with the popular Victoria or Niagara Falls. Waterfalling in programmatic advertising refers to a process where publishers move their advertising inventories from one Supply Side Platform (SSP) to the next with the aim of achieving the best bids or yields. Publishers use a Waterfall process or technique to attain the highest possible yields and sell-through-rates. This auction process is also nicknamed “daisy chaining.”
In this format, publishers often initially offer their inventories to advertising networks that usually offer higher bids and work their way down to platforms with lower rates. It helps them monetise or sell off as many inventories as possible. Going back to the property auction example, it is like starting with an auction house with very rich buyers and offering the leftover properties to property houses with less wealthy or prudent buyers. The publisher normally sets price floors, which are the lowest amount they are willing to offer ad impressions for (blocks of a thousand of impressions) and present these to SSPs with high-spending advertisers and then lower the price floors of unsold inventories as they offer them to lower spending networks.
Now, what is Header bidding?
Header bidding was introduced to improve the efficiency and yields of publishers. It is often considered an improved version of the Waterfalling technique and is increasingly adopted by major publishers across the globe. Within the industry, it is also known as pre-bidding or advance bidding. The idea behind Header bidding is that publishers offer their ad inventories simultaneously to all possible Demand Side Platforms (DSP) for auction.
With this, there is a clear and real-time visibility of bidders and the highest offer from an advertiser wins the ad impression on the publisher’s site. The thought behind this technique is to prevent moving inventory back and forth, which could ultimately lead to unsold placements and utter ad wastage. Header bidding, therefore, seeks to help publishers make more money and also ensures advertisers can secure a quick placement for the right bid.
Concerns with Header bidding and how they are addressed
Technology has certainly changed the ways in which ads are bought from publishers as the role of a trading desk or human salespeople has been reduced or replaced by a more efficient programmatic method. There are a lot of terminologies and elements to programmatic advertising but it is certainly a great way of buying digital ads. The aim of the publisher is to achieve the highest yield for their inventory whilst ensuring the experience of users is not negatively impacted by irrelevant ads or page latency. On the other hand, the aim of advertisers is to achieve their advertising goal and also ensure there is no damage to their brand in the process.