How brands can make the most of header bidding

Publishers are rushing head on into header bidding – the popular new technique sweeping ad tech by storm.

Most recently, Facebook joined the mad dash, experimenting with header bidding across numerous channels in its latest attempt to challenge Google.

With the rapid increase in adoption on the sell-side, it’s clear header bidding is a good thing for publishers. But what does the emergence of header bidding mean for brands?

Introducing header bidding: the great equalizer for programmatic access

Traditionally, publishers have sold ad inventory using a technique known as waterfalling, a process that gives inventory access to different sets of buyers sequentially based on their priority in the eyes of the publisher.

This priority can be determined by a variety of things, but often it is based on the revenue potential for the publisher, quantified by amount of committed spend of an advertiser or the historical average selling price for SSPs/Exchanges.

However, as programmatic buying has matured and become an outlet for advertisers’ more premium advertising efforts, this hierarchical and sequential bidding process is leaving money on the table by placing guaranteed deals above the often lucrative CPMs available from programmatic buyers.

In the last year, header bidding has turned the historical waterfall model on its head.

Publishers are now able to offer all of their inventory to all demand sources at once, opening the doors for RTB buyers to compete for the most premium inventory that was historically only accessible through guaranteed bulk purchases.

In effect, publishers are taking the demand from what used to be multiple sequential auctions, and collapsing this into one single, highly competitive auction that ensures publishers can extract the highest value for each impression. It’s a dream come true for publishers.

Three reasons brand marketers are on the bidding bandwagon

With so much to gain, it’s no wonder so many premium publishers are head over heels for header bidding. But Google, Facebook and other media owners aren’t the only ones benefiting. Programmatic’s latest poster child holds tremendous promise for brands, too. 

1) More inventory, more options

Under the old waterfall method, programmatic buyers had limited access to inventory, only getting access to the inventory that was not allocated to direct-sold campaigns at a higher rate.

But with header bidding, a publisher is likely to make more of its inventory available to anyone who wants it. In doing so, publishers have the opportunity to increase profits, and buyers gain access to a wider selection of ad space, such as premium content or low session depth impression opportunities.

2) Full audience visibility

Thanks to header bidding, programmatic buying platforms can now see every single impression opportunity for publishers utilizing header bidding. This translates into an enhanced ability to see where their target audience spends their time and plan campaigns accordingly.

This can be used to enhance digital planning through comprehensive audience insight that was previously unavailable in the waterfall world. 

3) Enhanced premium buys 

Private Marketplaces (PMPs) were created to enable advertisers to gain access to the most premium inventory available. Deals were set up to guarantee price or volume for access to this highly sought after inventory.

Historically, however, the “best” inventory in programmatic has not been the same as the best inventory a publisher had. Much of this premium inventory cleared higher in the waterfall, and never made it to the real-time bidding markets.

Header bidding expands the reach of PMPs to all of the publisher’s inventory, opening the door for even more widespread application of premium programmatic buying. 

Brands, beware

Any blind auction carries inherent risk of overpayment. A bidder will never be able to perfectly predict the final price of a second price auction when bidding against something or someone that they cannot see in advance.

Header bidding only increases this risk, as it increases competition, and can make the second price auction behave much more like a first priced auction.

This may cause some bidders to overpay for inventory due to a simplistic bidding strategy, and spend more than they ought to on certain ad spaces.

Header bidding also poses another threat to advertisers. With publishers offering the same impression to various exchanges at once, header bidding may cause brands to bid against themselves across ad exchanges.

This can increase prices and cause brands to pay more than necessary, especially when buying their own highly valued target audience.

While inventory prices are currently increasing due to header bidding, there will no doubt be a correction that brings programmatic pricing back in check.

Ultimately, buyers will develop tools and models to account for these upward pricing pressures, and will adjust their bidding behavior to ensure they are buying inventory at a price that meets their performance objectives.

Until then, the sell side will gain asymmetric benefits from the emergence of header bidding.

The promise of header bidding

Header bidding seems as though it’s here to stay, even given its relatively recent emergence into the programmatic fray.

Sky-high prices in programmatic auctions will decrease over time as brands and their agencies become more accustomed to header bidding dynamics. But header bidding symbolizes more than just new inventory and high prices.

It is a sign that the industry isn’t just using advanced programmatic techniques to trade remnant inventory anymore; programmatic is now being used to buy and sell premium inventory.

For brands, the less obvious opportunity enabled by header bidding is the ability to expand the application of programmatic buying to a larger portion of their media plan.

What have historically been unsophisticated and inefficient guaranteed buys transacted directly with publishers can now be executed in a data-driven manner.

This new format applies the data, decisioning and optimization of real-time bidding with the promise of minimizing wasted spend and enhancing the ROI of these campaigns.

Forward-leaning brands are taking advantage of this today, but it’s only a matter of time before programmatic becomes the norm for all digital media buying. And it’s all thanks to header bidding.