Provocateur

When it comes to digital advertising, there’s an ongoing debate between waterfall-based mediation auctions and header bidding. It may be a conversation that marketers think they can leave to their agency.

Not so fast…

The importance of mobile advertising is increasing in lock step with the unremitting increase in mobile interactions. And as mobile becomes a significant part of brand marketing spends, header bidding in the context of mobile apps demands brand marketers’ attention.

It’s well known that header bidding is increasingly popular with app publishers,

as they shift from traditional waterfall-based mediation auctions. And it’s no surprise why: In-app publishers are adopting header bidding platforms not

only to drive programmatic revenue to their apps, but also to enable a smoother user experience.

But marketers also can benefit from in-app header bidding. There are

several reasons.

Access to a significantly larger audience

In a traditional waterfall setup, inventory is passed on from one exchange/network to the next, based on the average, historical pricing (eCPM) of the exchange/network. In this setup, a typical advertiser would only access the part of a publisher’s user base and inventory available at the exchange’s waterfall position. This inefficiency is starker with mobile app publishers.

In the in-app ecosystem, the waterfall model often relegates the programmatic advertiser’s access to remnant inventory, given the numerous advertisers vying for high-quality inventory at the top of the waterfall. Relatedly, mobile ad networks often lock in publishers’ first-look inventory through guaranteed pricing and private deals. The implication of this commercial approach powered by waterfall auctions is that brands reach only a sliver of a publisher’s actual audience and inventory.

Header bidding resolves this inefficiency through a single, unified auction spanning every demand partner. The unified auction allows marketers and their platform partners (DSPs) to access not just a portion of a publisher’s inventory, but all of a publisher’s inventory. The unified auction could improve user access for advertisers by up to 4-5x on some publishers. This is a significant game-changer, allowing marketers to target users in a more granular manner without any loss of reach, thereby maximizing the impact of every ad impression served by an advertiser.

Every bid matters

Given that waterfall models call demand partners hierarchically, advertisers

are treated unequally for each new ad request by default. Additionally, this hierarchy of ad calls is typically built using a historical average price delivered

by the network/exchange, and not real-time bids delivered by advertisers during each auction.

This is a gaping inefficiency for advertisers. A marketer willing to pay a highly competitive real-time bid for a specific user or impression may still be able to reach the user, if the historical average eCPM of an ad network is higher. This not only creates invisible competition in the form of historical eCPMs, but also drives a negative feedback loop wherein advertisers may mistakenly believe inventory to be significantly more expensive than its actual value.

The most advanced header bidding platforms all ensure that every bid matters: All auctions are unified, and all auctions are cleared using real-time bid responses from advertisers. This creates a true, fair mechanism for advertisers to reach the users and impressions they value the most.

Understanding actual user reach and planning for scale

The auction mechanics aside, marketers strive to estimate, forecast, and scale their reach of unique users — and they work with their DSP and exchange partners to achieve a clear understanding of this reach. However, in traditional waterfall models, this modeling is not only inaccurate, but also highly variable, making it difficult to forecast into the future.

While the inaccuracy of estimates is largely driven by partial access to inventory at any point of time, the variability is caused by changing waterfall positions. This is an unavoidable nuance of waterfall-based models; always-on unified auctions, however, resolve this issue.

Transparency and improved trust

The unified auction model delivers improved transparency to advertisers, through deeper metrics at an impression level — including the bid landscape, advertiser density, and advertiser mix from all competing demand-side players such as SDK-based ad networks. This is supported by programmatic hygiene metrics such as viewability and traffic cleanliness.

Additionally, with header bidding, publishers and advertisers should be able to recognize and weed out any inefficient buying channels through funnel visibility; that is, gain a clearer understanding of all the players involved in delivering the ad from an advertiser to the user via the publisher. While not an obvious, merit of all header bidding implementations, a true header bidding model based on a unified auction will help expose any “middlemen,” as the exact same traffic is now available through these middlemen but at a higher price point compared to the primary header bidding exchange. This margin saving could easily be 20 to 30 percent, shared between advertisers and publishers, benefiting both.

Has in-app header-bidding’s time arrived?

As header bidding proliferates, it brings with it a few logistical challenges.

Demand-side players will need to contend with a significantly higher volume of traffic, which could drive up infrastructure investments and expenses. This logistical tax may be resolved in the short term through improved algorithms from DSPs that drop any traffic from publisher inventory they do not expect to bid on.

A separate challenge is that header bidding is expected to remain a “large publisher” phenomenon in the short-to-medium term, meaning that marketers and DSPs may not be able to extend all the advantages of this model to small and medium-size publishers that also represent a significant chunk of user time today.

It’s also important to note how first-price versus second-price auctions continue to affect bid prices and win rates. With only first-price auctions, DSPs always know exactly what they’re paying. Second-price auctions can sometimes help depress costs, but they often lack transparency in their functionality.

Despite some challenges, header bidding it remains a top choice for programmatic trading models for mobile in-app inventory. It opens up opportunities for publishers and marketers alike, making the programmatic bidding process more open, fair, up-to-date, and transparent. Unified auctions are a win-win for both advertisers and publishers, ensuring all sides can reap the full benefits of programmatic buying in every auction.

About the Author

Anne Frisbie is SVP and GM, Global Brand & Programmatic, at inMobi.  Anne has held several senior leadership positions during her 10 years at the mobile ad network.​

Prior to inMobi, Anne held senior executive roles at Yahoo! and other tech firms. Early in her career, Anne was an analyst at Goldman Sachs.