Everything you Always Wanted to Know about Header Bidding* (*But were Afraid to Ask)

What is Header Bidding?
Header Bidding (also known as advance bidding or pre-bidding) is an advanced programmatic technique adopted by publishers. It allows them to offer ad inventory to multiple Supply-Side Platforms (SSPs) simultaneously.

So, how do real-time auctions work without Header Bidding?
Typically, a bid request for programmatic inventory is filtered through a chain of potential buyers in a waterfall-like structure.

When a user visits a publisher website that does not support header bidding, impressions served are first made available to direct buys, who have the highest priority in an ad server.  If the direct buyer is not able to serve on the available inventory (such as when the user being bid for has reached their frequency cap, for example) then the ad server will move to the next highest priority – buyers bidding through Real-Time Bidding (RTB) auctions.

In RTB Auctions, the bid request filters through SSPs in a prioritized “floor rate” order. SSPs with the highest bid floors are first given priority — with the minimum bid floor decreasing as the auction reaches further down the list. From publisher to publisher, SSPs will have different priority. For example, on Expedia.com an SSP might have first priority, but on eBay.com they might be the fourth SSP to see the bid request.  For this reason, it is preferable to have integrations with multiple SSPs — which ensures an advertiser has priority access across publishers.

How does header bidding change the current structure?
Header Bidding flattens the current waterfall structure by sending a bid request to every integrated SSP simultaneously — rather than having requests flow sequentially through the ad server’s priority structure.

This means that every SSP integrated with a publisher will get the same ad call at the same time, rather than having to wait their turn. As a result, whomever submits the highest bid wins an impression — no matter what – even if the publisher has a direct buyer.

So, how does header bidding help publishers?
Header Bidding is a major win for publishers’ ability to maximize revenue from their existing ad inventory.

In a traditional waterfall structure for real-time auctions, the highest bid from the highest priority SSP would win an auction — even if there were higher bids further down the chain. For example: Let’s say an SSP — let’s call them “SSP1” — submits a bid from a client that is above the bid floor.  In a traditional waterfall auction environment, SSP1 is nearly guaranteed to win the impression. This is the case even if a competing SSP — let’s call them “SSP2” — has a bid from a client that is more competitive.  The impression has already been sold to SSP1, which in this case, was the higher-priority SSP.  This represents a lost revenue opportunity for the publisher, whose impression has not sold for the highest possible CPM.

By offering an impression to every SSP at once, it allows all bids to compete purely based on value — and not waterfall priority — maximizing publishers’ revenue from each impression.

What do Demand Side Platforms (DSPs) get from header bidding?
By removing the priority structure, Demand-Side Platforms (DSPs) can submit their most competitive bids to access inventory previously available only to direct buyers and higher-priority SSPs.

If a DSP has an advertiser with a strong interest in a certain inventory source, they can work directly with that publisher to create a private marketplace (PMP) relationship — or establish a bid floor that would be competitive with direct buys.

As a result, DSPs can access a wider net of inventory….assuming, of course, that they’re willing to pay a premium for it!

So what’s the downside?  Are there negatives to Header Bidding?
Because every SSP is offered the impression simultaneously, both competition and prices for impressions will increase.

Knowing that they’re competing within a wider pool of advertisers, DSPs and advertisers will increase bids to stay competitive. This means the average impression will likely become ever more expensive.

SSPs however, may see a downside as publishers may experience latency issues — because a header auction takes longer to finalize than the traditional RTB waterfall structure.  This may add milliseconds before page load and cause timeouts, ultimately hurting the user experience on publisher sites.

Additionally, because bid requests are no longer being filtered through a chain of bids, DSPs receive multiple identical bid requests simultaneously. This could result in duplicated traffic that could in turn overwhelm ad servers and cause inefficiencies in those bidding for impressions in a header-bidding environment.

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