15 minute read
First Price Auctions to Sell Ad Inventory
by Chris Stark
If you’re a publisher, there’s one question that’s always top of mind no matter what kind of content you produce or how long you’ve been in business: How can I increase my revenue? In today’s rapidly-evolving advertising environment, there are many answers – but header bidding is the solution that’s arguably produced the most impressive results for our publishing partners in the last year thanks to how it’s revolutionized the auction process.
The technology can feel daunting and complex, so if you’re still confused, you’re not alone. The first thing to understand is how auctions have been affected by header bidding – and how that could mean significantly more revenue for you – so that’s what this post is designed to do. In future posts, I’ll go more in-depth with case studies, industry predictions, interviews and more – and I’d love to hear your continued feedback.
Before header bidding, the only way to maximize publishers’ non-guaranteed inventory was by setting up a complex chain of partners to compete in a sequential waterfall in the ad server. Let’s say you were using Google Doubleclick for Publishers. In a waterfall setup, impressions went first to direct deals, then to private marketplace deals. After those guaranteed deals received the impressions they needed, Google AdSense / Ad Exchange and the top partner in your waterfall setup had the first crack at bidding on available impressions. From here, remaining partners fell into tiers in your waterfall and only got to bid on an impression if the tiers above them had passed on it. In this scenario, the majority of good impressions were gone before anyone else lower in the waterfall even got a chance to see it. That means many networks were unable to compete for inventory – even if they were willing to pay more for it – simply because they never had the opportunity.
This daisy chain carried a host of challenges for publishers, including:
Publishers become beholden to Google and their top tier partners as the only sources of fill for their premium non-guaranteed inventory. This created a complete lack of transparency because publishers were left completely in the dark as to how much other exchanges would have paid for this same inventory.
While the waterfall was developed to enable publishers to increase yield by managing multiple network partners, the end result caused issues with site latency. The more ad calls your waterfall was making, the slower your site became.
Waterfalls accounted for as much as 10% loss in impressions each time an impression was sent down the chain. The more partners you had integrated, the higher your loss would be.
Header bidding created a new way for 3rd party networks to bid in parallel vs in sequence – dismantling that waterfall setup so parties can get a fair look at the impressions they want most. Advertisers now have the opportunity to bid on premium inventory not normally available in waterfall auctions. Publishers have greater control of inventory, allowing them to sell on a per-impression basis, which maximizes yield of under-monetized impressions through direct competition between buyers.
The programmatic playing field has essentially been leveled through the creation of a fair auction. Transparency has increased across the board for both buyers and sellers, and 3rd party networks now get a fair shake at the impressions they want most, which ultimately increases demand and revenue for publishers.
With header bidding, publishers have the capability to choose which partners they want to integrate. This group of chosen partners are aggregated into a single request that receives bids from partners simultaneously when an impression occurs.
The winning partner is chosen based on their real-time bid value, which is then passed to the ad server where key-values trigger a corresponding line item to serve an ad at that value for that partner. This competition not only gives other networks the chance to be evaluated on the same level as Google but can drive up the CPMs of direct deals as publishers gain a better understanding of the true value of their inventory.
This is a big advancement for publishers, with benefits including:
By implementing a header bidding setup for demand partners, publishers can move away from the waterfall setup and eliminate the issues that arise with it. This means less latency and fewer impressions lost when header bidding is setup correctly.
The demand partner that wins the auction and invariably shows an ad is the one with the highest bid, not the one highest in the waterfall. This evaluation of the real-time CPM bid, rather than the historical CPM paid by a partner, gets publishers closer to receiving the true value of their inventory. Publishers have seen as much as 10% increase in yield by integrating just one header bidding partner.
Publishers pick and choose which demand partners they wish to work with in their header bidding wrapper, ultimately choosing who wins the auction based on the highest bid.
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