September 29, 2021

What is Header Bidding and How Does it work?

A deep dive into client-side header bidding and how it’s changing the programmatic advertising landscape

Header bidding is to programmatic advertising as peanut butter is to jelly. It just makes it juicier, in terms of yield that is. This technique has been a huge breakthrough in the programmatic space, specifically for ad operations since it went mainstream in 2016.

Header bidding is the next evolution of multi-partner management and the successor to tag-based waterfalls. It renders the ad buying process more transparent for publishers, giving them more control and allowing them to earn higher revenue from their inventory. For advertisers, header bidding allows access to premium inventory with increased overall visibility of a publisher’s inventory, previously only available through direct sales.

In this article we’ll take a closer look at various aspects of this hot topic technology, including how header bidding works and the differences between the waterfall and header bidding auction mechanisms.

What is Header Bidding?

Header bidding is also referred to as “advanced bidding” or “pre-bidding”. It is an advanced programmatic technique where publishers can offer inventory to multiple ad exchanges at the same time before making calls to their ad servers.

Header bidding is a subset of real-time bidding (RTB), which is a mechanism for buying and selling ad impressions through an auction, very similar to the stock exchange. This process is referred to as ‘real-time’ because it begins as soon as a user loads a webpage and finishes within milliseconds as the ad is delivered once the page is loaded. We go into more detail about real-time bidding in our Intro to Programmatic Advertising post.

However, header bidding is different from traditional real-time bidding auctions in that “instead of each ad exchange having their own auction, one at a time, at a much lower priority in the publisher’s ad server, header bidding allows all the ad exchanges to bid at the same time at the highest priority in the ad server,” explains.

How does header bidding work? 

To break it down, it looks something like this:

Header bidding works with a javascript code that is placed in the HTML “header” code of a web page. As soon as the webpage loads, the header bidding code is activated and the website directly calls all demand partners simultaneously to bid on an impression before calling the ad servers. This whole process happens in less than half a second. 

As this split-second process is taking place, each demand partner is also holding its own auction to determine the top bid to send. The highest bid values from each partner are then passed from the visitor’s browser to the publisher’s ad server before its own direct inventory is called.

Why is HB so important?

By selling inventory on a per-impression basis, publishers have increased transparency and hence a better understanding of their inventory worth.

With header bidding, advertisers gain access to all of a publisher's inventory with the possibility to send higher bids for premium inventory. “Instead of having an unknown place in a waterfall or priority setting within a publisher’s ad server, each demand partner is offered the same available impression(s) and therefore has the chance to see the full audience and reach of the supply partner.” as explained in IAB Europe’s Header Bidding and Auction Dynamics whitepaper.

Header bidding solves the inefficiencies of the waterfall model by “optimizing across the SSPs and maximizing yield” as IAB Europe goes on to detail.

“On this basis, the publisher is likely to receive significantly more bids for each impression offered. The final auction can happen within a publisher ad server that is normally not designed for this purpose. As a result, buyers have increased access to the inventory they may be looking for and the publishers can further optimize their yield.”

What was used before in digital advertising?

Was this always how digital campaigns were executed? Not at all. Before header bidding became increasingly popular after 2016, programmatic auctions were set up in a variety of ways, the most popular probably being the waterfall system. Nope, not Niagara.

Waterfalling, also referred to as ‘waterfall tags’ or a ‘daisy chain’, is an auction process used by publishers to sell remnant inventory. When a publisher is left with premium inventory after passing through direct sales, it will initiate all of its demand sources one at a time, one after another to try to sell that remaining inventory.

Header bidding vs. Waterfall

Let’s take a look at the differences between the waterfall and header bidding mechanisms. 

In this example:

During the header bidding auction, an ad network placed third in the header auction queue may have an average historical yield of $2.50 CPM, but would be willing to pay $3 CPM for an impression if the user meets its targeting criteria. In the waterfall system, this network might not necessarily win the impression despite having a higher bid.

With a waterfall system, demand sources are handled via a ranking system. Normally demand sources are placed from the highest average historical yield to the lowest. Unsold inventory is offered to the top-ranked ad exchange, normally determined by size, rather than by the highest bidder. Some demand sources may be willing to pay a higher price for a given impression than their average historical yield.

There is the “passback” or “fallback” option but it doesn’t take into account simultaneous auction bidding from all ad networks as does header bidding. A passback code will call on a different ad network if another fails to fill the impression. Many publishers choose the passback system which is still quite a valid way to monetize remnant inventory. ShowHeroes offers a passback system along with ad hoc deals to establish a priority chain.

ShowHeroes Solutions with SSPs during the Header Bidding process

Showheroes Group uses a combination of header bidding and dynamic, tag-based waterfalls that are highly optimized by self-learning machine learning algorithms to provide advertisers an exclusive look into inventory and give publishers various monetization opportunities with both client-side and server-side bidding.

ShowHeroes Group Senior Consultant - Global Programmatic Advertising Amanda Cohrs in her “Heroes on the Go” header bidding episode provides some insight into how heading bidding works and also, how the ShowHeroes Group works with various SSPs.

Each of our SSPs has varying offers, some being specialized in video or other formats. According to the specific business case, ShowHeroes chooses which SSP to work with according to where they are strongest in the market. Our main partners include Xandr, FreeWheel, Smart and Yieldlab.

Watch Amanda’s video below for more information.

Are you an Advertiser?

Do you want to learn more about header bidding and ShowHeroes solutions for advertisers? Get in touch with us!

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