Member blog: Header Bidding Brings Transparency to Programmatic

The rise of header bidding lights up the media supply chain

by James Brown, Managing Director EMEA, Rubicon Project

Over half of European display ad spend is now traded programmatically, reaching a market value of more than €12bn. One of the key drivers behind this meteoric growth is undoubtedly header bidding.

Header bidding provides ad servers with the opportunity to optimise inventory delivery by offering the same impression to multiple ad exchanges concurrently. As opposed to the prior “waterfall method,” which gave exchange partners access to inventory one-by-one, header bidding effectively democratises programmatic inventory access while making ad buying and selling more efficient and transparent.

In light of IAB Europe’s new whitepaper on header bidding and auction dynamics, here are some virtues of header bidding and how the practice is lighting up an at times opaque and inefficient programmatic supply chain.

Open Source Technologies

In the header space, open source software is fast becoming the modus operandi for header bidding management. When speaking about header bidding, Prebid’s open source technologies specifically offer efficient, free and fair open-source solutions to publishers in programmatic advertising.

Such open source technology brings more transparency to deal-making because by virtue of it being open source, all participants have a clear understanding of the dynamics of the header bidding wrapper. Open source wrappers are inherently neutral: no one party gets preferential treatment. This levels the playing field and drives publisher monetisation while providing greater access to broad demand.

Fairer Pricing

With the advent of header bidding, some tech companies used the new technology to gain access to inventory and then misused the auction by moving to 1st price without telling their buyer customers. This enabled them to win market share and gain an unfair advantage. The market has now collectively moved to first-price, as this ensures that everyone adheres to the same rule set, where in a second-price world, buyers were disadvantaged if using second-price auction bidding strategies against those operating under a first-price mentality.

While this shift has clarified pricing, it has brought a new challenge for buyers looking to maintain high win rates and capture targeted audiences without exhausting their budget in a first-price auction. First-price (in theory) ensures that buyers pay only what they are prepared to bid, and increases their win rates. The practice of bid shading has developed as a means of buyer protection, wherein the exchange or SSP calculates an average price in between first and second-price, based on bid history. Pricing models such as bid shading will likely continue to evolve and improve in the header space to make pricing fairer for all parties.

Efficiency on the Supply Side

Perhaps the greatest benefit of header bidding on the buy side is the increased transparency into supply-side configurations. Initiatives such as ads.txt help publishers and the whole supply chain crack down on ad fraud — particularly the reselling of unauthorised inventory and domain spoofing — by verifying that a business is authorised to sell a publisher’s inventory.

To further ensure we maximise the value of this initiative, we believe buyers should partner with exchanges that have a comprehensive ad quality and verification process. Ensuring that every partner in the supply chain is taking advantage of initiatives such as ads.txt plays a key role in safeguarding quality inventory and the reputation of our ecosystem as a whole.

Overall, the growth of header bidding has pushed forward the programmatic advertising industry and democratised inventory access, providing buyers with more data to help inform forecasting and bid strategy. As the adoption of header bidding continues to rise, the programmatic ecosystem is poised to become more efficient and well-lit than ever before.

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