Header bidding is the process where multiple advertisers participate simultaneously in a digital auction to win ad space on your website. This auction occurs on every page load, as well as any time an ad unit refreshes.
Publishers are able to earn the most money through header bidding because all advertisers are able to compete directly. This increased competition drives up bids, resulting in higher CPMs and allowing the publisher to earn the highest revenue every time.
Digital advertising before header bidding
When programmatic advertising first came on the scene, it was revolutionary to be able to buy and sell ads via an automated process. Known as real-time bidding (RTB), this was much more efficient than managing direct sales across several ad networks. But the system wasn’t perfect.
With RTB, ad inventory could only be offered to one ad network at a time which meant that publishers had to prioritize the ad networks they worked with based on their historical or expected performance. They would stack them in a hierarchy (often called an “ad stack”) and set a “floor” (minimum winning bid) for each network.
The highest-tier network got first dibs on ad spaces, and if that network didn’t bid high enough, the ad space would be offered to the next network on the list, and so on. This system of layering demand sources is sometimes referred to as waterfalling or daisy chaining.
This waterfall setup had several drawbacks. Lower-tier networks would often lose the bid to a higher-tier network, even if they were willing to pay more. As long as the higher-tier network met the floor price, they won the bid, often leaving money on the table.
Additionally, offering ad spaces to one network at a time caused latency with page load times.
How does header bidding work?
Header bidding was developed as a way to solve these two problems. With header bidding, all advertisers are able to bid at once and the top bidder wins the ad placement.
Publishers, and ad management companies who run this technology on behalf of publishers (that’s us at AdThrive!), are able to control the partners who participate in the auction and can remove any that underperform to keep the process efficient.
There were some hiccups at the start, though. Header bidding could still be slow, especially when too many bidding parties were added to the auction, and it was hard to tell which bidders were performing the best.
One of the challenges was getting all of the different partners’ code to play nicely with one another. The solution came in the form of a “wrapper” — a piece of code that provides a unified framework within which all bidding partners can work together.
The wrapper also offers a timeout setting which further speeds up the auction process by capping the amount of time to accept bids. Finally, the wrapper allows the page content to load first, before the ads, improving site speed and user experience.
At AdThrive, we work with Prebid, the industry-leading header bidding wrapper solution, and actively contribute to improving this technology for all online content creators!
Another technological improvement, server-side header bidding, moves the requests to an external server, reducing the strain on the user’s browser and making the auction even faster.
Header bidding gives all advertisers the chance to place the winning bid for ad spaces on a site, which means publishers take home the highest revenue possible for each ad impression. Through header bidding, many content creators have been able to earn enough to support themselves, making full-time online publishing an attainable goal for many people!
Looking for an ad management company to help optimize digital advertising on your site? Contact us today to find out more about partnering with AdThrive!