Game of Header Bidding

minonline.com

It's all right if you find the perpetual commotion of the ad-tech space hard to follow. The convoluted proceedings might feel like lost "Game of Thrones" plots, only with less sex and violence (actually, that depends on which conferences you attend).

Take the other week, when Google made the startling announcement around the Dynamic Allocation service inside the Double Click for Publishers (DFP) sell-side ad server. Although the company's blog post made no mention of header bidding, it was clear that Google's move to open up Dynamic Allocation to approved third-party partners was a merciless strike at the nascent technology and the growing base of header bidding players. Predictions of header bidding's imminent demise spread throughout the land.

Header bidding is called such because it's based on code that sits in a website's header. When a browser arrives on a page, the code fires relevant user information (e.g., cookies, public browser details) to a tech provider's server, where that company may run an auction to gather advertiser bids on page inventory. The server responds with a bid that is sent back through the header to a corresponding price tag within the publisher's ad server. The call and response happens before the page is actually loaded.

"Wha?" was my initial reaction on learning how header bidding works; followed by "Why does such an asinine system exist?" Well, it has to do with the limitations of the ad server.

There are many demand tiers within the ad server—indirect demand sources such as supply-side platforms will typically take lower priority versus guaranteed, direct sold campaigns (a.k.a. the high-rollers). Before header bidding, these demand sources would typically have only one price tag entered into a publisher's ad server: the average price advertisers within that provider's auction would bid on a publisher's impressions.

The actual final bid could vary greatly depending upon the user and context—it could be much higher—but an auction wouldn't be carried out until the ad server moved down the priority line.

Although header bidding existed before dynamic allocation, the introduction of that technology can be directly linked to header bidding's rise in popularity. The majority of digital publishers use DFP to serve ads (display, rich media, video) into their desktop and mobile environments. Dynamic Allocation enabled Google's creatively named ad exchange— DoubleClick Ad Exchange, or AdX —to run an auction every time an impression comes through and have the winning bid considered­—even next to direct-sold campaigns.

So any bid that came in through AdX that was higher than the average price tags from indirect sources would likely get precedence, although other SSPs and exchanges might have advertisers willing to pay more. Worse, digital advertising auctions are second-price auctions: the winning bidder pays only a cent more than the second-highest bid.

Publishers were potentially leaving all kinds of revenue on the table while Google cashed in, one impression at a time.

In response, SSPs and exchanges jumped on header bidding to send real-time valuations from a demand source into the publisher ad server. Instead of a single average price tag, demand sources may have turned hundreds of tags in different increments (10 cents is typical) sitting within a server.

The return call sent through the header code gives a more accurate valuation to a corresponding tag, letting those indirect sources truly compete with AdX—and even direct-sold inventory. Header bidding integrations are relatively painless, and "wrappers have emerged that send and receive multiple header calls simultaneously.

Beyond all the deep-weeds tech and jargon, everyone in digital media should be interested because header bidding helped raise many publishers' display CPMs. Real-time valuations have aided in publishers' understanding of how much advertisers will pay for specific inventory and audience, which can then be used to justify or bump up rate cards.

So rather than Google striking a blow, the Dynamic Allocation announcement was really a concession: Publishers and header-bidding providers forced Google to change how its ad server operates and let in such third-party sources as T he Rubicon Project and Index Exchange, two major supply-side platforms and demand sources that will be hooked in via server-to-server integrations. Quite the coup, really.