What is Header Bidding? A Complete Guide

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What is header bidding?

Header bidding, also called advance bidding or pre-bidding, is a programmatic technology that lets publishers offer their ad inventory to multiple advertising demand sources like Amazon and Google simultaneously. This increases the publisher’s revenue because the advertising demand sources bid against each other as they try to win impressions.

Header bidding has grown in popularity in recent years because it generally provides substantially more advertising revenue than AdSense. In fact, research shows that 79% of the top 1,000 US websites (as ranked by Alexa) now use header bidding. This is in contrast to the legacy “real-time bidding waterfall” (RTB) method and AdSense.

25 November 2020

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What is header bidding and how does it work?

Jimmy, a vacuum salesman, sets out on a day of work with his very best vacuum. He has been instructed to accept no less than $500 for this vacuum. 

Jimmy knocks on his next door neighbor’s door first because she purchased a vacuum from Jimmy last year. He asks what she is willing to pay for his beautiful new vacuum cleaner and she offers $400. It’s not enough, so Jimmy continues to the next house.

At the second house, Jimmy receives an offer for $520. It meets the requirement so he accepts the money and finishes his sales for the day.

Little does Jimmy know that the third home on his list would have been willing to pay $700, but he never got the opportunity to sell to them.

So what does Jimmy have to do with header bidding?

Metaphorically speaking, header bidding would have allowed Jimmy to offer the vacuum to all three homeowners at the same time and accept the highest possible payment of $700. Jimmy missed out on $180 because he wasn’t using header bidding.

rtb-waterfall-diagram
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Header bidding vs RTB

Programmatic advertising was initially built on the RTB waterfall approach. There are similarities between Jimmy’s sales approach above and the waterfall approach – offering ad space to the highest bidders one-by-one in a cascading fashion.

After direct deals were filled, unfilled inventory would be offered to bidders one ad exchange at a time. If nobody bid over the publisher’s price floor in the first exchange, the inventory would be passed back and offered to the next network with a lower floor price. This would continue until an ad network bid high enough or the publisher called its ad server. 

The problem with waterfall auctions

The problem with waterfall auctions is if anyone further down in the bidding process is willing to offer more money, they may not get the opportunity if the inventory is sold early in the process. This is exactly what happened to Jimmy.

Another problem with the waterfall system is that top-ranked ad exchanges usually got the first opportunity at a bid. Unfortunately for publishers, the ranking system was often determined by the size of the network rather than the amount they were willing to pay for a bid, resulting in lower yield for the publisher.

The waterfall system is inefficient and ineffective, making header bidding one of the greatest technological breakthroughs for publishers.

header-bidding-diagram

Header bidding explained

For a publisher, it all starts with embedding a small string of script in the header of their website. We will come back to implementation later – for now, let’s focus on the actual process of filling ad inventory.

 

The process goes like this:

  • A visitor clicks on a website and the page loads in their browser
  • The short string of JavaScript in the header of the website makes a call to several ad networks
  • Each ad network places a bid on the inventory
  • The winning bid is passed to the publisher’s ad server
  • The publisher’s ad server connects the user to the advertiser’s server
  • The winning ad creative is displayed to the user

This entire process happens within milliseconds! You can see from the process why it is sometimes called “pre-bidding,” as the auction is relocated from the ad server onto the header of the publisher’s webpage.

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The pros & cons

Header bidding is not a perfect solution – we aren’t the first to say it and certainly won’t be the last. It is, however, the best solution available to publishers today and has a number of benefits for both publishers and advertisers alike. It has created a more sustainable advertising ecosystem.

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The pros

  • Publishers are making more money. This is probably the most important benefit to publishers. Depending on the solution a publisher is using, it’s not uncommon to see an increase in revenue between 10% and 100%, with some publishers seeing even more than that.
  • More competition. More buyers means higher CPMs.
  • Reduced latency in comparison to RTB waterfall. There is a decrease in time for rendering with header bidding, meaning a better user experience.
  • Easy to manage. If you’re working with a credible header bidding solutions partner, you should be able to plug and play with little fiddling after implementation.
  • Fewer reporting discrepancies. It is a single auction meaning less room for reporting errors.
  • Better visibility for advertisers. Buyers can see the inventory available, meaning a better opportunity to win premium inventory compared to old RTB waterfall methods.
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The cons

  • Most publishers need help with implementation. The technology behind header bidding is complicated – there is no denying that. But there are many ad tech businesses like Snigel who have devoted their time to perfecting the technology so that publishers don’t have to.
  • Page load times. This is a common concern for publishers looking to use header bidding, but will vary in severity depending on the solution a publisher uses.
  • It may take a few months to see an impact. Some publishers even find that there are initial losses in revenue but with a bit of tweaking this can be optimized.

Implementing a solution for your site

Luckily for you, header bidding has been around long enough that ad tech experts have built entire businesses around streamlining the implementation process to make it seamless and easy for publishers to implement and manage. What would otherwise be a long, expensive, and complicated process involving numerous developers, is now as easy as putting a string of script into your header or footer, leaving you free to focus on generating great content. 

Finding a header bidding company

The first, and most important, step for you will be finding a reliable, trustworthy third-party ad tech service that offers a header bidding wrapper. 

The great thing about using a third-party service is they’ve been pouring everything they have into perfecting their ad monetization technology to ensure you get the best results. But be careful – not all ad monetization businesses are created equally. Many offer basic services, but it is the details that matter most like payment terms and service levels.

Another benefit to using an outsourced ad monetization service is that many work on a revenue sharing payment setup. This means it is in their best interest to provide their publishers with the very best ad yield possible so you both win.

While publishers are giving up a portion of their revenue in exchange for help, publishers generally see a net increase in revenue that would not be possible without the help of their third-party service. This is because third-party businesses generate enough overall volume to form valuable relationships with high-quality advertisers and network partners that you wouldn’t normally be able to access as a small to medium publisher. Not to mention, the monetary and time investment to use header bidding without a third-party partner would end up far exceeding your revenue share in a third-party exchange.

What should you look for in a header bidding company?

If you do a Google search for ad monetization, you’re going to get hit with loads of results. How do you tell them apart? Which ones are better than others?

We know ad revenue is usually a publisher’s livelihood so finding a third-party to manage it is a huge decision and it shouldn’t be made lightly.

Here are a few things you should consider:

  • Do their products provide what you need? Some simply offer header bidding, while others have additional functionalities like consent management, programmatic deals, and free tools.
  • Does their business model work for you? Some businesses offer more of a plug-and-play solution, while others approach their clients with more of a full-service consultancy approach. Which do you prefer?
  • Do their company values align with yours? Some focus on service, some focus on performance, and some do both.
  • What are your priorities for your site? For example, one ad tech business might focus solely on revenue, another may pay more attention to user experience and site speed.
  • What are their payment terms? This is a big one. What are your cash flow requirements? Most businesses have lofty payment terms, though there are a select few who can pay you within 30 days.
  • What should you expect from a service perspective? Make sure they give you a good ad ops person to work on your site! This can make all the difference, as an experienced ad ops person will know where to place ad units, when to use video vs. interactive units, etc. They will also keep testing for improvements on your behalf to make sure your site is truly optimized for maximum revenue on an ongoing basis.
Want to learn about how header bidding could increase your ad revenue?

Header bidding companies

There are a wide range of header bidding companies for website owners to choose from. When researching header bidding companies examine the range of solutions they offer. Do they have the following?

In addition, the header bidding company’s payment terms should be noted. Some header bidding companies pay net 90 days while others pay as low as net 30 days. 

Header bidding wrapper

A header bidding wrapper is a Javascript tag placed in the header of a page that provides access to multiple advertising demand partners and rules for profitable real-time bidding (RTB) ad auctions. The header bidding wrapper lets publishers flexibly add or remove advertising demand partners without altering the website’s code. In addition, the wrapper enforces timeout settings (the amount of time bidders have to respond) and triggers the asynchronous call for advertising demand partners to submit bids.

Without a header bidding wrapper, a publisher would have to manually replace the old header tag with a new header tag every time an update occurs. Furthermore, publishers would have to add and remove individual tags on the page for each demand partner. Overall, the header bidding wrapper provides an efficient structure for creating your ad auction.

Want to learn about how header bidding could increase your ad revenue?

FAQ

Header bidding definition

Header bidding lets website owners connect to multiple advertising demand sources simultaneously. This increases competition for the website’s advertising inventory, resulting in more advertising revenue for the website owner. In most cases, header bidding provides more advertising revenue than Google’s AdSense which is why 79% of the top 1,000 US websites (ranked by Alexa) use header bidding.

Header bidding solutions

A header bidding solution lets website owners use header bidding technology. Website owners can either use a third-party solution like Snigel’s AdEngine or create their own header bidding solution using open-source code like the repository at Prebid.js. The vast majority of website owners use third party solutions because the technical, administrative, and maintenance burdens of creating a header bidding solution in-house are significant. In addition, third parties usually provide a range of monetization tools such as smart ad refresh, adblock revenue recovery, native video, and interactive ad units which further increase advertising revenue.

Header bidding server side

Server side header bidding allows the auction to occur outside of the user’s browser. This reduces the number of calls going to and from the web page. Instead, The auction is held after one call is made to an external server. This results in faster page load times and lower processing power requirements which improves the user experience.

The first header bidding systems created an auction within the user’s browser which requested bids from multiple advertising demand sources. However, latency increased as more SSPs and ad exchanges were added to the auction. Server side header bidding (S2S) was established to combat this latency.

Header bidding and Google

In response to header bidding, Google developed their Open Bidding solution – formerly Exchange Bidding Dynamic Allocation (EBDA). Open Bidding allows website owners to connect to other SSPs and ad exchanges with Google Ad Manager. This makes Google compete against these new advertising demand sources. However, there are some drawbacks. Google hasn’t revealed the internal logic that Open Bidding uses to select auction winners which limits transparency and control for publishers, SSPs and ad exchanges. As a result, many SSPs and ad exchanges have not integrated with Open Bidding. This has led to lower overall demand on the platform.

The first header bidding systems created an auction within the user’s browser which requested bids from multiple advertising demand sources. However, latency increased as more SSPs and ad exchanges were added to the auction. Server side header bidding (S2S) was established to combat this latency.

 

Is header bidding right for my website?

If you’re a publisher and you want to increase your revenue, it’s likely that header bidding would benefit you!

 

Get in touch with one of our header bidding experts today to find out how we can help.

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