Ad Tech Deconstructed: What is header bidding?

by Katy Jensen on Sep 6, 2018

The world of ad tech can be confusing—that’s why we’re bringing you our Ad Tech Deconstructed series. We’re putting ad tech under a microscope to examine exactly how things work. For today’s installment, we’ll talk about what exactly header bidding is and how it works.

Header bidding is an advanced programmatic advertising method where advertisers are granted a “first look” at publisher inventory that is available across multiple ad exchanges simultaneously (also known as a “pre-bid”). It started as a bidding method for desktop web advertising, allowing publishers to work with third-party header bidding providers to implement code in a web page’s header. This code allows these providers to access multiple ad exchanges at once.

Until recently, header bidding wasn’t available for mobile apps, but as we quickly shift to a mobile-first world, the mobile space needs a bidding model that’s been proven to optimize CPMs for publishers like header bidding has on the web. Technical issues and the lack of actual headers in apps had prevented the solution from becoming widespread on mobile, but technological barriers are quickly being broken down.

Although technically programmatic, header bidding has some key differences from the traditional programmatic method, which is known as the “waterfall.” In the waterfall, publishers’ ad servers will automatically prioritize the ad networks they work with on any given transaction based on the rates offered for that impression. Header bidding, on the other hand, allows publishers to offer their inventory in auctions that take place outside of the waterfall. This means that the inventory that publishers place with various ad networks can be bid on simultaneously to achieve the highest possible CPM.

Header bidding decreases fragmentation between demand sources because an advertiser is able to bid on ad impressions across many sources simultaneously. The flip side of this is that many different advertisers can see a given publishers’ inventory, so the process increases yield for pubs as well. Basically, a more democratized advertising solution that allows advertisers to see more publisher inventory and that allows publishers’ inventory to be available to more advertisers is a good one, because all parties benefit from it.

Header bidding allows advertisers to compete in real time for impressions rather than being placed in a hierarchy of demand partners, so publishers are able to ensure they actually achieve the highest possible CPMs for their inventory. Opening up the playing field to all advertisers allows publishers to look at each bid on each impression individually rather than looking at an average, meaning the actual highest bidder will always win the impression. It also has the added benefit of increasing CPMs because of the increased competition among advertisers.

Have more questions about ad tech? Check out our Ad Tech Deconstructed series where we break down specific parts of the mobile advertising world to help you get started advertising or monetizing your apps.

Katy Jensen is AppLovin’s content marketing associate.

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