IX Perspectives

Header Tag: The White Paper

Header bidding is simple – instead of running exchange partners through a waterfall in order to sell an impression, publishers surface the impression to all sources of demand simultaneously. The highest bidder wins and then signals to the publisher ad server that an ad has been sold. We think header bidding is a significant innovation to the ways programmatic auctions are run that will provide both the buy and sell sides with value.

It allows the buy side to act on audience first strategies:

Before header bidding, a buyer’s ability to compete for impressions depended on their position in the waterfall. Header bidding has leveled the playing field and provided buyers with:

  • Full visibility into publisher inventory. Header bidding consolidates all demand, so advertisers see all inventory a publisher is selling. This allows them to better understand a publishers’ marketplace. Instead of getting blindly led to one section of a supermarket, advertisers can now peruse the whole store.
  • More opportunities to reach specific audiences. The waterfall can cap the number of impressions an advertiser can buy, so if they are targeting specific audiences they might not have as many opportunities to reach them. Let’s say an advertiser really wants to buy “green moms” and a publisher surfaces 100 green moms to programmatic channels. That advertiser might only see 3 of those 100 “green moms” because of her position in the waterfall. With header bidding, the advertiser will see all 100, and have the opportunity to buy each of them.
  • The ability to pay the real time value of a user. The floor prices of waterfall auctions signal value to demand, which can influence the bidding behavior of a demand side platform. With header bidding, floor prices are obsolete, so impressions are priced based on how valuable they are to an advertiser. The advertiser has more control over pricing and can use price control to secure the impressions they are in the market for.

It supercharges the publisher’s programmatic marketplace

Header bidding simplifies the publisher’s auction environment and helps publishers understand the true value of their inventory. In time, this information will help publishers shape their programmatic strategy. Header bidding also:

  • Eliminates the technical complexity of the waterfall. In a waterfall set up, publishers typically have to run multiple auctions. Each auction takes time, requires multiple technical processes to run, and can end up costing the publisher. With header bidding, the auction kicks off right as a user is loading their browser and runs until an ad is sold. It eliminates pass backs, which often cost publishers in both fees and impressions.
  • Improves user experience by decreasing latency. Ask any digital publisher and they’ll tell you: the amount of time a user has to wait for a page to load negatively affects user experience and audience retention. Tag-based, or waterfall, run auctions significantly slows down a page load. We examined latency across two different auction environments and found the following: 98% of header tag run auctions are complete in 200 milliseconds or less, while 58% of tag-based, waterfall auctions take place in 400 milliseconds or more.
  • Increases yield. Header tag adds more bid density to a publisher’s ad stack, which drives up demand and thus, the clearing price for the media. We compared average CPMs for digital display in a waterfall environment to average CPMs with header across Q2 2015 and found that header CPMs outperform waterfall CPMs in open exchanges by 166% and by 46% in private exchanges.

Taking a look at the data

Source: Index Exchange, marketplace data Q2 2015

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Figure 1: Average digital display clear price by marketplace type (relative)
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Figure 2: Header tag spend relative to tag-based spend is sizeable
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Figure 3: Majority of Index Exchange header auctions take 200 milliseconds or less
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Figure 4: Most non-header auctions take 350 milliseconds or more

Questions to Ask of Your Header Bidding Partner and Why They Matter

Question Why it matters
What is your process for implementation? There are two components to header bidding implementation: web development and ad server configuration. As header bidding requires code to be added to a site, and changes for the purposes of advertising are rarely prioritized, it can help your team significantly if you find a provider who is willing to make the change on your behalf and customize it to meet your needs. The second component, ad server configuration, requires your header bidding provider or your ad ops team to manually enter line items in your ad server. The more granular these line items are, the better you’ll activate demand at its true value.
Is your tag asynchronous or synchronous? An asynchronous process allows for simultaneous processes to take place on your site at one time. In the case of header bidding, asynchronous processes help ensure page content loads without blocking, impression loss, and protects the user experience. Require a header bidding solution that functions asynchronously.
What is your data center footprint globally? It’s important to find a provider that has a well distributed and significant data center footprint. It protects against latency and ensures that your header bidding partner can support traffic and source demand, quickly, across the globe. If your audience is global, your partners need to be too.
What are your sources of demand and how unique are they? Make sure your header bidding provider has carved out unique partnerships with demand sources. If they have, there is an ability to access truly unique budgets that may live in private exchanges, or specific trading desks. Also press your header bidding provider for full fee transparency — if they are taxing you for access to demand, it’s important for you to know.
How agnostic is your header bidder toward tag management solutions and ad servers? Determine if the tag is engineered to perform better with a certain ad server or tag manager. It’s best to have a header bidding partner that has experience working with multiple container and serving technologies and can understand how to troubleshoot in a multitude of ad technology portfolio environments.
Is there an in-house team to support technical troubleshooting and engineering? Figure out the internal resources your header bidding provider has directed toward managing the technical work behind your integration. This will show you how dynamic it is and how much support is allocated to making sure header auctions are running smoothly and effectively.
Can you provide a mediation layer to support multiple header tags? Many publishers work with multiple header bidding solutions to ensure their impressions are sourced to different types of unique demand. In doing so, latency can become a serious issue. Determine if your provider has the ability to provide a mediation layer that functions as a container tag for all of your header bidding integrations. If the solution is complimentary, even better.
If so, is the mediation layer agnostic to all other demand sources? Determine if your provider’s mediation layer will play nicely with all exchange partners. If you’re working a header bidding provider who also functions as the mediation layer, make sure it’s a neutral.

Conclusion: Header Tag will catalyze an update to publishers’ ad stacks

Thanks to growing sophistication on the buy and sell sides and a universal desire to improve the efficacy of digital display advertising, a change is underway in the digital display market. We think header bidding is a necessary step toward advancing programmatic strategy. As more and more publishers begin to implement header bidding, create more premium ad experiences (and fewer of them), and sell viewable impressions only, there will be more competition for fewer impressions. Concurrently, the buy side wants to make sure they are reaching high quality audiences for their advertising and will be willing to pay to get their ads in front of them. Publishers should experiment with flipping their ad stack once they’ve implemented header – it gives them a chance to source programmatic, open market demand first, which will help them realize the true value of their programmatic inventory.

[1] http://digiday.com/publishers/wtf-waterfalling/

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