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Why header bidding will be one of the most talked about topics of 2016

The rise of header bidding shows no signs of slowing and Google’s ad exchange is feeling the pressure.

A favourable integration between Google’s ad server DoubleClick and its ad network AdX gives preference to Google’s demand sources through ‘dynamic allocation’, which is widely viewed as unfair within the industry. Header bidding combats this and creates a level playing field by allowing other demand sources access to publisher inventory before it is sent to the DoubleClick server. In response Google has launched its own version of the technology, DFP First Look, to rival header bidding.

So what exactly is this disruptive technology and what are its implications for the wider industry?

Header bidding is a programmatic technique used by publishers to increase yields on their inventory. By inserting code into their page header, publishers can make an impression available simultaneously to multiple demand sources, such as ad exchanges, before their primary ad server is called, and can then include the bids received in the ad decision-making process. Allowing more demand sources to bid on each impression increases competition and maximises yields for publishers.

As well as achieving higher bids for impressions, header bidding also provides increased transparency, enabling publishers to understand the true value of their inventory. It eliminates passbacks – which occur when an ad exchange or network hasn’t been able to reach the agreed price floor and so re-directs the impression back to the publisher’s ad server for reallocation – and reduces inventory wastage, which are both characteristic of the traditional waterfall approach to programmatic selling. 

Seen as a method for combining direct and indirect demand, header bidding is an increasingly popular technique now used by more than half (53 per cent) of the larger publishers. It has spawned the development of another new technology in the form of header-bidding wrappers – which help publishers manage and monitor demand partners – and work on header bidding technology for mobile apps is already underway.

While it is primarily designed to protect the interests of publishers, header bidding also has benefits for the buy side. It makes the marketplace more transparent as bid requests are generated for each individual impression, allowing advertisers to see all inventory available from a publisher, both direct and indirect. As inventory is made available across multiple marketplaces, advertisers are also able to purchase impressions from a variety of channels.  

It may seem like a simple technical process but the implications of header bidding for the industry will be widespread:

The publisher waterfall will cease

Also known as daisy-chaining, waterfalling is a programmatic process used in RTB where an impression is offered sequentially to different channels in descending order of perceived value. The process reduces competition, limits revenue, and often results in wasted inventory, but until recently publishers have had little choice but to accept the model. With its ability to make inventory available to multiple demand sources simultaneously, widespread adoption of header bidding will spell the end for the publisher waterfall.

The marketplace will consolidate

The traditional waterfall approach to programmatic selling allowed supply-side platforms and exchanges to proliferate with few constraints, but the advent of header bidding is likely to bring some changes. Publishers will limit the number of header tags they deploy on their sites to avoid latency issues, meaning only the most profitable will be included and smaller, less effective exchanges will struggle to survive. To ensure they’re chosen as a header bidder, sell-side businesses may look to acquire or build buy-side platforms to make sure they can provide publishers with high quality demand.      

Programmatic models will evolve

Programmatic direct is a non-auction based programmatic model that combines the efficiency of automation with the safety and control of direct buys, but it doesn’t allow advertisers to take a first look at inventory and buy only what they want. The popularity of header bidding may slow the growth of programmatic direct in some instances, as the technology enables publishers to offer a first look at their inventory in an RTB environment. It is possible a new model may emerge in the form of programmatic forwards or futures to combine the best of programmatic direct and header bidding, and benefit both the buy and sell sides. 

Header bidding is leading the way in a new era of programmatic efficiency and will have far reaching consequences for the industry. As the technology develops it will continue to drive revenue growth for publishers as well as transparency for advertisers and – with big names such as Google playing a central role in the discussion – header bidding will undoubtedly become one of the most talked about topics of 2016.

Lisa Menaldo is managing director UK at Sublime Skinz

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