Header Bidding Explained in Simple Terms

Header Bidding has been around since 2014 and many of large publishers have been using it ever since replacing the old way of selling programmatic ads – waterfall. Only about 22% of website owners actually understand how Header Bidding works and it could be because it is explained poorly as it is often portrayed that it requires a lot of knowledge. Even though there are many partners that can be used who have developed their own Header Bidding solution, it is important for you to understand how it works in order to make the most out of it.


Lets look at the complex definition of how header bidding is generally explained, here is an example from DIGIDAY:
Header bidding, also known as advance bidding or pre-bidding, is an advanced programmatic technique wherein publishers offer inventory to multiple ad exchanges simultaneously before making calls to their ad servers (mostly DoubleClick for Publishers).

The definition does not really say that much and is over complicated, also it is not that rare for larger publishers to use their own ad server instead of DoubleClick for Publishers (now renamed to AdManager).

Lets Talk Simply

The best way to explain how this programmatic bidding works would be to have some real life example. Really, this is nothing new and humans have been going to auctions and bidding bets for thousands of years.

Let’s imagine, you are back in 10th century and would like to sell your personal Doomsday Book (this would be a banner on your website) for the best price. It would be a waste to just sell it to the first person you meet when it could be sold for more by just adding a little competition as there must be more people willing to buy this precious book. Or you could just sell it to the first person who offers the minimum amount of silver pennies, without asking the next person if he/she would wish to pay more that is what we call waterfall (image below).

So you are smart and let everyone in the county know that you are selling a book and if they are interested they should come and compete in an auction. Those who are not interested will just wait for another opportunity and bid for a different product (banner). The auction begins and you have set a minimum price (floor price) for the book for 2 silver pennies so that those who are not willing to pay that do not take space in the square. Because of the minimum price not many people came, this time only royal people are here (high end ad exchanges, SSP’s, DSP’s).
Sir number one bids: 3 silver pennies.
Madam number two bids: 5 silver pennies.
Sir number three bids: 1 silver penny.
Winner: Madam number two with 5 silver pennies.
That is how header bidding works.

What Exchanges Should I be Aware of?

There are plenty of SSP’s (ad exchanges) out there, the best way is to just check what some of the large high quality premium websites are using and checking the bidders by yourself. We would suggest that you try out a plugin made by AppNexus (one of largest header bidding partners). You can download the chrome extension here: Headerbid Expert. For some websites you will see no bidders, this means they are not using such a solution and are still doing it old school or they have enough direct campaigns that it is not needed.

How it works in practice

Lets have a look at a few websites using header bidding and what partners they have added, there is a high chance that they themselves do not have their own solution but rather choose an already created product. In the first picture we can see that cutestockfootage.com is using about 12 SSP’s (ad exchanges) as part of its header bidding, in this case the product he is using is Setupad (you can check this by looking at ads.txt – will be explained further in the article).

Cutestockfootage.com Header Bidding Partners
Image 1. Cutestockfootage.com Header Bidding Partners
Telegraph.co.uk Header Bidding Partners
Image 2. Telegraph.co.uk Header Bidding Partners

In Image 2. the screenshot is taken from telegraph.co.uk (one of largest new websites in the United Kingdom). As it shows a smaller website such as cutestockfootage.com has more header bidding partners than telegraph.co.uk.
There could be a good explanation. One website uses an experienced and high quality partner who has 100% focus on the product. Whereas the other has their own direct sales.

In combination with selling the leftover inventory in the open market and is not so focused on it. It is nice of course to develop header bidding on your own, but it is not always the best. A lot of the large premium SSP’s require a high amount of incoming traffic. Meaning they are only be available to massive publishers. Some of the SSP’s (Header Bidding partners) work best in certain markets, for example Admixer is better in Russia, Criteo for Europe, Adform will work great in Baltics and Europe, Appnexus and Rubicon will really work anywhere. If you are a small publisher this would not really matter as the best partners require at last 50-100 million visits a month.

Most popular Header Bidding Partners

Header Bidding Adapters Used by Publishers
Image credit: https://blog.getintent.com/

First price and second price auction

This sounds very complex, right? Well, it is not really. Many of the SSP’s (ad exchanges – including Google) allow their advertisers to pay for a banner just one cent more than the second highest bidder (second price auction).
For example: Buyer 1 is ready to pay $1,00 max, buyer 2 is ready to pay $2 max. Because of the second price auction rule in this case buyer 2 will only pay $1,00 + $0.01 = $1,01. Does not seem right, especially for a website/blog owner right? While advertisers use this opportunity to pay as least as possible, it is not good for website owners.

That is why in the recent years there has been a shift towards first price auction. Meaning that advertisers have to pay exactly what they are willing to, not based on other bids. If the bid for the banner ad $13,33 the advertiser will pay it. This means that a blog owner earns as much revenue as possible. Some SSP’s (ad exchanges) try to hide this fact. Reason is to not scare away some of their advertisers, but now more and more partners are going public. They will now generally try use first price auction. A recent announcement by Google is that they are shifting away from second to a unified first price auction. In turn helping publishers earn more and industry to grow.

Other ways to check what partners other websites are using.

Ads.txt has been around for a while now, but not everyone is aware of it. To simply put: Ads.txt lets buyers (SSP’s and advertisers) to make sure that they are buying ads from your website. Additionally informs that your account is the one who is actually selling the ads. Back in the day it was possible to declare your inventory to be from a high quality website. This meant that you could just place banners on some illegal domain. Advertisers would pay a lot for very bad inventory without knowing where the money is actually ending up. It is very easy to implement and it is worth it even if you only use Adsense as the only ad network.

How to check this? Well, you can go to any website really and see for yourself. Just add /ads.txt at the end of any domain. For example: forbes.com/ads.txt (uses a few partners) or hbr.org/ads.txt (only using google).

How to implement header bidding

There are many partners out there that have it all ready for you. All you need is to place the banner on your website and you are all set. The best way to get started is to just look at the main website of them all: Prebid. Here you will be find everything that is needed for you to get started. Keep in mind that this will require a lot of work and dedication. If you need some assistance or help you can go to contact us page and we just might help you.

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About Alvils Karlštrems

Alvils Karlštrems is an Ad Operations Specialist. Knows all the ways how to optimize ad delivery on websites.

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