Header bidding may have appeared a win-win for everyone except Google as it arrived in the marketplace in 2016. But fast-forward to today, and the picture is a little different. While considered a highly successful way of purchasing and selling programmatic media for publishers, the method has put a strain on advertising tech vendor infrastructures and accelerated advertising supply commoditization.
The approach, that lets publishers offer inventory to multiple ad exchanges concurrently prior to making calls to their ad servers, was created from publishers’ desire to loosen Google’s grip on the programmatic ad market with its waterfall auction process. The use of it now is fairly ubiquitous.
But as the use of header bidding is becoming more widely adopted, there have some unintended long-term effects. Here’s a look at who are the long-term winners and losers.
Where subscriptions publishers discuss the Trump and Brexit lumps , electronic advertising sales execs discuss the header-bidding bump. Hands down, publishers have gained the most from header bidding. Early reports that header bidding increased page-load latency were addressed with wrappers and finally server-side choices — where the burden of the advertisement calls are taken off the publisher browser or header and on the ad server. Many reported early spikes in programmatic advertisement yields as a result of its adoption in addition to CPM increases as bidding density intensified.
While initially considered a core technique that could improve publisher programmatic revenues, at the short term at least, buyers are starting to see more benefits.
“By opening up new opportunities for the demand side, such as increased transparency for buyers to supply-side configurations, it will be the buyers who become the mid-term winners,” said Andrew Buckman, managing director for Europe, Middle East and Africa for advertising tech seller Sublime. “CPMs will begin to decrease as buyers develop improved negotiating tactics and gain greater access to publisher inventory.” Buyers only really started thinking about the consequences of header bidding this season, a momentum that will continue to build into 2019, according to Amar Goel, founder and chairman of Pubmatic.
Although header bidding became the ad tech buzzword of 2016, Amazon was playing in that courtroom for decades already with its A9 header-bidding product which some publishers had already adopted. That place the e-commerce giant in prime position for the development of the next stage of header bidding — server-side bidding. While its server-side solution Transparent Ad Marketplace is by no means ubiquitous among publishers, it’s been one of the first major companies to provide a bona fide server-side option.
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Header bidding has put supply-side platforms under pressure. While early adopter SSPs benefited from an increased share of impressions they had available to sell, these wins were short lived.
“Now header bidding is widely adopted, it’ll be the SSPs that become the biggest losers,” said Buckman.
Its introduction changed the SSP hierarchy, with those who could claim exclusive access to publisher stock — and higher positions in the waterfall — no longer able to do so. Instead, header bidding allowed all SSPs regardless of size or relationship with publisher partners, to compete for inventory alongside each other exchange. While publishers enjoyed the higher bid density and, thus, higher CPMs driven by that, over time, SSPs started looking more and more similar. Supply has been commoditized.
SSPs that enjoyed a good stream of supply from publishers at the pre-header bidding times, are now competing with each other exchange for the identical access to inventory. That means their win rates have dropped dramatically.
“An SSP can be processing the same amount of impressions from a publisher but winning a sixth of the time,” said Goel. “So win rates and revenue per publisher is far smaller.”
Header bidding has produced different headaches for DSPs. Infrastructure costs of header bidding have gone up dramatically for DSPs and exchanges.
DSPs have been overwhelmed by the sheer quantity hike in ad calls sent to them by the SSPs. Whereas before they may have received, for instance, 100 impressions they could bid on by a single exchange, they are now receiving that number of bidding requests per SSP each second. Nevertheless, the original volume of inventory coming out of the publishers has stayed the same.
While some have claimed success in forcing down their query-per-second costs, that has taken serious time and technology source, according to ad tech sources. That is a resource that could have been committed to coming up with new innovative products.
“DSPs have fought with the increased volume of bid requests, which are mostly duplicative,” stated Matt McIyntre, head of programmatic for Europe, Middle East and Africa for Essence,”Added to that, the perceived value of the SSP category, in general, has diminished, which is placing further strain on the fee squeeze they’ve experienced over the last few years.”