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Header bidding and DFP first look: Quick fixes to a horizontalization revolution

Alex Reinhold, head of global supply at Sociomantic, discusses one of the biggest buzz phrases in programmatic media buying at the moment, and calls out Google for its role in negatively impacting the sector.

Header bidding, our industry’s jargon à la mode! It sprawls across headlines. It’s splashed across presentation decks. Talking heads everywhere deliberate its main functions. And yet header bidding is not this proactive, almighty movement as has been proclaimed. In reality, header bidding is an act of defiance by ad exchanges against the big bully, Google.

Strangely, not one person uttered “Google” during the heated exchange about header bidding at a programmatic panel in IAB’s Leadership Summit this year. All these programmatic experts seemed to recoil at the thought of saying the 'G-word' out loud, as if it were a curse akin to Voldemort he who must not be named.

To discuss header bidding without addressing Google is insane.

Ultimately, both Google and ad exchanges are offering their attempts at horizontalisation—and our industry is lapping it up.

Let’s take a step back. Traditionally, ad servers were built to administer direct deals. But as more and more channels were thrown into the mix, and as the convolutedness associated with programmatic buying snowballed, ad servers found themselves burdened down with complexity.

In order to pull off a publisher’s intent of filling each available ad slot whilst maximising revenue per impression, the ‘waterfall’ (wherein impressions are delivered to channels in descending order of recognised value) seemed the only feasible design.

But the publisher waterfall has an undeniable Achilles heel: guaranteed impressions associated with direct deals are often rewarded with CPMs far lower than what could be achieved in auctions. In turn, auctions have historically only existed with the programmatic ecosystem. Thus, ‘horizontalisation’—levelling the playing field for buyers, maximising revenue for publishers—is the game changer everyone’s desperate for.

But is header bidding really the anticipated departure from this vertical, trickle-down arrangement?

Doubtful.

What we have witnessed recently is nothing but intense efforts to apply the revenue-maiximising principles of auction-based trading to the ad server as a whole. This is a trend instigated by Google. On its path of adding solutions to DoubleClick for Publishers (DFP) in quick succession, Google had paved the way for their version of horizontalization: DFP First Look.

First, Google auctioned programmatic clearing prices against non-guaranteed sales channels like ad networks, price-priority deals and so on (Dynamic Allocation). Next, the same idea was replicated for guaranteed channels, particularly direct deals, without affecting fill rates by reaping the benefits of partners’ excess demand (aka, Enhanced Dynamic Allocation).

Finally, Google created an auction throughout the entire ad server regardless of fill rates (voila, DFP First Look). Because the vast majority of publishers use DFP, this eponymous product DFP First Look seems a genius solution.

Unfortunately, not unlike that pimply twit from school, Google had bullied all the kids on the playground, shoving them around and taking all their lunch money by, effectively, making these features exclusively available on its very own exchange, AdX. If you can’t pay (so to speak), you can’t play.

So, how’d the other players protect themselves? Easy. They came up with the concept of header bidding. Each of them. At the exact same time. A large number of supply partners I’ve spoken with recently claimed they were the first to come up with header bidding. Truly. And, irrespective of who the great innovator might be, it is a remarkable attempt at horizontalization.

Ad networks—notoriously willing to do anything for that ‘first look’ (nope, not the Google one) had used header bidding from the outset. Now everyone wants to join the party. And it makes sense. Header bidding facilitates the ability to match the highest overall header bid – be it an auction through an exchange or direct-buyer integration – against ad server line items. Header bidding thus enables publishers to replicate Google’s DFP First Look by involving more players than just Google’s AdX.

Despite the industry’s fast-paced strides, I’ve learned that investment in short-breathed, trendy solutions does not help anyone long-term. It’s not sustainable. And we find ourselves faced with two interim, unsustainable solutions to horizontalisation.

As mentioned earlier, everyone wants in on the header bidding party. But too many merrymakers can ruin a good thing. General consensus amongst industry experts say there is just enough space for four to five partners. Anything beyond that only serves to harm the publisher, regardless of how progressive the container tag solutions might be. To put this into perspective, Sociomantic currently works with more than 40 ad exchanges. As potential demand sources diversify further, ultimately everyone—be it ad networks, SSPs or even DSPs—will be vying for their position in the header. How do publishers then decide whom to invite or boot out the door? It’s a tricky situation, to say the least, and it raises questions about header bidding’s sustainability.

So we find ourselves in a quandary. Google has a seamless and, by all means, smooth solution to horizontalisation. But (and it’s a big but), it is limited to AdX as the only exchange.

Meanwhile, header bidding is a knee-jerk reaction that will break the efficiency of your page should you invite too many demand sources. And publishers will have to manoeuvre through this thorny path in due course.

As it stands, publishers have three choices: 1) Work with AdX as the only exchange, 2) overcome this temporary dilemma by submitting to great efforts required of header bidding implementation, or 3) wait for a sustainable, non-discriminating solution – one which makes ad serving truly horizontal.

This revolution towards horizontalisation is a good thing. Great thing, even. It helps publishers to maximise revenue and buyers to finally compete on a level playing field. For that to happen, Google and all masterminds behind header bidding need to acknowledge one another, for starters. Then, make peace, break bread and work together towards true horizontalization.

After all, we all want the same thing: one auction across the entire ad server.

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