There are not a lot of ways in which ad inventory is sold in an auction. On paper, the whole idea of programmatic is automation, however, there is a great deal of work and practice that needs to be put in the technology itself before it all becomes automatic. In this post, we will quickly review both waterfall and header-bidding and will compare the pros and cons of each of these solutions.
What is the 'waterfall'?
Waterfall setup looks quite simple, there are several SSP/exchange/networks aligned in a 'ladder', based on their previous performance to the publisher. Publisher firstly tries to sell its inventory via direct sales, as these generate more revenue. If it is unable to do so, the publisher will then pass the impression down the waterfall to various potential buyers (ad networks) until it is sold. Those with, best past record of eCPM, fill rate, latency, etc. will be at the top of the ladder.
The CPM price floors decrease as you get lower down the waterfall as well as the chances for advertisers to get the best inventory to bid on.
What are the benefits and disadvantages of waterfalling?
The waterfall solution is quite simple to implement. Technically it only requires the job of pasting passback tags from one SSP (or network) to another. It can be done by a junior ad ops manager without much of technical knowledge. However, it's also less flexible, for example, if a publisher wants to change the hierarchy of the "ladder" it needs to re-paste many of the tags. Then, if something goes missing it can result in an empty impression and lost revenue.
If done right publishers can sell off a decent amount of their ad inventory - this comes both an advantage and as a disadvantage since the CPM decreases while the impressions go further down the waterfall. The main problem the waterfall technology tries to solve is to leave publishers without any unsold inventory, however, it lacks the in the right technology for yield optimization.
Since the impressions are being passed down the waterfall multiple times until the inventory is bought, loading speed of the page is affected - the longer it takes, it is less likely the user will see the ad. Also, there is a chance that SSP on the bottom of the waterfall could have paid a higher price than SSP on the top, but didn't have a chance to provide its bid and participated only on the 2nd hand auction.
Because of the many downsides of waterfalling, more and more publishers moved towards header-bidding solutions.
What is header bidding (HB)?
Header-bidding is a programmatic technology which helps publishers to offer inventory to multiple SSPs at the same time.
How does header bidding work?
Publisher needs to implement the header-bidding script typically in the head of the page and as a user visits the site, an ad request is sent to all integrated partners at the same time. The main difference between waterfalling and header-bidding is that publishers increase their yield by letting multiple demand sources bid on the same inventory at the same time. Whoever bids the most, gets the impression and this ensures that publishers can sell their inventory for the best price.
What are the downsides of header-bidding?
Since the auction happens faster, it saves load time and more impressions are getting sold. Therefore fill-rates of header-bidding are also higher. SSPs may complain that publishers are generating more traffic to their platforms and if sell-through rate is low, they may stop the cooperation due to cost efficiency reasons.
If the script needs to be implemented in the header of the publisher's website, same as waterfalling, it still affects page loading speed and this is where server-side bidding comes in.
What is server-side bidding?
As the name itself states 'header-bidding', it's not a wild guess that it works in similar ways. The main difference from HB is that the bid requests are being sent to different SSPs from the server side contrary to the auction taking place in user’s browser. This way the browser can load and display content without the heavy lifting of taking bid requests and further improve the issues of page latency other solutions are facing.
Benefits and disadvantages?
One may think server-side automatically improves yield. While it does improve the number of impressions that can be delivered it doesn't necessarily result in more revenues. It is mostly cookie-matching challenge that results in fewer impressions being sold. Therefore server-side bidding hasn't substituted header-bidding yet and only a hybrid solution could be at publishers best interests.
Where does this leave the publishers?
Publishers have the choice to either develop and test their own solutions in-house or use other already tested and verified solutions that will guarantee not to compromise programmatic revenue streams.
We at Setupad have developed our own 'hybrid header-bidding' solution that offers the advantages from header-bidding and server-side bidding at the same time eliminating the disadvantages. Our solution is quite simple for the publishers to implement, it doesn't require any tag in the header of the publisher's site, we use a tag-based solution and the implementation happens on the ad server. This automatically connects the publisher with top partners worldwide. We take each publisher into account and optimize the best solutions accordingly. This individual approach helps us to get the highest revenues for each of our clients. Several case studies that we have conducted have proven that we increase publishers yield up to 80%.
Test our solutions to see for yourself.