Waterfall Model Vs Header Bidding in RTB

In today’s, ever-changing world of advertising, new methods are trends are appearing every time. So much, that sometimes it becomes hard to keep up with them. Here, we are offering a small breakdown of two popular programmatic advertising methods to buy and sell online advertising inventories. These are Header Bidding and Waterfall Auctions.

What Is A Waterfall Auction?

Programmatic media sales have their origins in publishers’ efforts to reduce unsold impressions. The real-time bidding procedure (RTB) and several other technology platforms involved in the online display ad ecosystem served to allow publishers to get rid of any ad space that had not been sold through a direct relationship with advertisers.

The waterfall auction was the by-product of this. It is also known as waterfall tags or daisy-chaining. In this procedure, a publishes gives its inventory from one ad network to another in descending order of significance until all the impressions are sold.

Usually, the ad networks are ranked as per the average historic yield they have generated for the publisher. This signifies that an ad network where premium inventory has been sold in the past will get the first chance on the further impression from a similar publisher.

If for any reason, the first network does not produce a satisfactory bid, the following ad network is called for bidding, and it continues.

Due to its easy and simple setup and as it assists publishers to ensure that they are not left out with any kind of unsold ad space, waterfalling has been the approach of choice for several years.

However, it is not perfect.

Issues with Waterfall Auctions

Waterfall auctions come with a few drawbacks.

Most particularly, the procedure of “passback”- accepting bids from different ad networks in turn-signifies that there is less competition for ad impressions, which in turn leads to lessening the overall yield of publishers.

If a certain inventory piece was of high value to an advertiser buying through an ad network that fell lesser in the daisy-chain, that advertiser might be interested to bid a much high price for it if given the chance earlier in the procedure. But, without any access to the auction from the initial stage, they are reduced, and prices become lesser.

Pass backs can lead to latency. As the ad call passes to each ad network, the loading time of the pages can be affected, which in turn creates a negative user experience.

What Is Header Bidding?

Header bidding is another selling procedure used by the publishers to sell their unsold inventories. However, instead of contacting the demand sources by the browser one by one, header bidding brings every demand sources together simultaneously and permits them to bid on the available inventories at the same point of time- even prior to the sale of premium inventory and inventories from the ad server of the publisher. Those who return a bid in time are considered.

The biggest benefit of bringing all the purchasers together for conducting a header bidding auction is that publishers can increase their yield, since:

  • Publishers can bring all the interested purchasers to the table at the same time and look at all the bids, which generally results in finding a demand source wanting to buy the inventory at a high price than most of the premium purchases. Also, with waterfall auctions, there may be a demand source willing to pay for more inventories but may never get the chance to place a bid.
  • Publishers attain the real price of their inventories, not an estimate or average.

How does header bidding work?

It depends on a piece of Javascript on a publisher’s page. It runs a real-time auction and permits purchasers to bid on advertising. All these things usually happen in milliseconds for each ad space available. This is how a header bidding works:

  • A user opens a website. The head tag of the publisher requests various ad networks to bid on the ad slot to fill the offered impression
  • The ad network keeps its bids
  • The winning bid is then passed to the ad server of the publisher
  • The ad server of a publisher connects the server of an advertiser and the user, which illustrates the winning ad creative

Disadvantages of header bidding

Though header bidding solves several problems with waterfall auctions, it does have drawbacks. First, it is technically more complicated to apply code to connect each ad exchange/ SSP/ ad network with a publisher’s page wanting to be added to the page in question.

For another, header bidding can generate latency issues, too, as every tag placed in the header has the possibility to slow the loading time of the page.

Then, there is an issue of duplicate bidding. An advertiser who is plugged into different ad networks could end up bidding against itself without understanding it, which in turn can impact the performance negatively, including the amount of exchanged data of the ecosystem.

These two programmatic selling methods have a few similarities: Both these were invented as revenue optimization hacks for the publishers.

Both header bidding and waterfall model are done from the client’s side- meaning that the “call” to those demand sources are made on the browser of a visitor.

The main difference between the two is, in the waterfall model, the calls are made in a sequence. On the contrary, in header bidding, calls are made simultaneously.

Header bidding permits premium publishers to sell premium inventories to the highest bidder at scale, soaring over one of the biggest restrictions of the monotonous waterfall setup.

Header bidding is a new norm of programmatic ad serving, while the waterfall is becoming vaguer. Though it does not mean that waterfall will irreversibly fade into obscurity. Some of the publishers who prefer direct sales will probably use it to prioritize their direct deals. Overall, though, you must have close look at header bidding, if you have not implemented it yet.


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