Understanding header bidding: Your complete guide

Header bidding has changed the way publishers auction their advertising space. A study that observed the internet’s 30,000 most popular website domains found 60% included tags from header-bidding vendors. Adopting this method has proven to generate results, with 31% of publishers witnessing an increase in yields. A similar change has occurred for mobile with in-app header bidding. In this guide, we outline how programmatic header bidding works, current trends and share best practices to help you optimize performance.

What is header bidding?

Header bidding is a type of programmatic media buying that enables publishers to offer inventory to several ad exchanges before they request ad servers.  Also known as advance bidding, header bidding is a method that lets multiple demand sources bid on the same inventory, creating a fairer and more competitive ecosystem that optimizes a publisher’s revenue. Speaking with Digiday, Yieldbot CEO Jonathan Mendez explains that “Header bidding is a much cleaner and better tech integration between revenue partners, ad tech companies and publishers compared to what’s going on currently.”

Header bidding requires a piece of Javascript in the header of a publisher’s page used for advertising to users. Buyers can bid to place their advertisement within that ad space. Once a user clicks onto a website or app, the publisher sends requests to several ad networks — who can then place bids according to what that advertising space is worth to them. The winning bid goes to the publisher’s ad server, which connects the advertiser’s server with the user, displaying the highest bidder’s creative. Moreover, by combining inventory into a single server-side supply, the publisher can sell their inventory on a per-impression basis, providing transparency into the value of each impression.

When determining whether to adopt header bidding, you will need to analyze your traffic, viewability and revenue goals. You will also need to choose between a proprietary wrapper or an open-source wrapper and whether you want to perform client-side or server-side header bidding. We will cover all of these terms in our guide.

What happened before header bidding was introduced?

Before marketers could benefit from programmatic header bidding, advertising space was only delivered once the ad placement started to load on a webpage. “When a person visited a website, the publisher’s direct orders would be served first, because they sat at the highest priority in the ad server,” explains Ben Morrisroe in an article for Publift. “Once the frequency cap on the direct order is exhausted, the ad server will pass the impression down to the programmatic line items in a sequential waterfall system, a real-time auction environment.” However, with these systems, a marketer’s impressions sell for a price that isn’t guaranteed to reflect its actual value. The highest-ranking ad exchange is initially offered any unsold inventory rather than going to the highest bidder. If they decline, the offer is passed down until a bid is made. This occurs even if someone who ranks lower would have paid a higher price for the impression —  meaning the publisher loses revenue. This is why programmatic header bidding is so important.

What is a header bidding wrapper?

The header bidding “wrapper” manages and organizes buyers, setting rules for the programmatic auction. It is also known as a header bidding container or framework. Publishers can use a wrapper to maximize how many demand sources can compete within an auction without additional work to include new partners. Wrappers also ensure every partner will have their bid requests triggered at the same time. It can also perform management tasks such as dropping partners from the bidding process.

There are two main types of wrappers for header bidding, and the best option for you will depend on your technical capabilities.

Proprietary wrapper: Wrapper providers manage demand partners and set up. Index Exchange is the second most popular wrapper in the industry with 23% adoption, using their proprietary code. The majority of demand partners will use their wrapper technology. While you are more reliant on partners with this method, it is easier to implement and get support when needed. Wrapper vendors will usually offer their analytics tools to help you optimize and manage operations. Most wrapper vendors also enable you to create line items in your ad server using automation.

Open-source wrapper: This is a custom wrapper using open-source technology (usually Prebid.js by Appnexus or Pubfood.js). These enable you to set your own rules and functionalities, but you will need to invest more technical resources for support and updates. Prebid.js is the most popular option throughout the industry, with 26% adoption. Other options include Prebid Server for server-side setups and Prebid Mobile for iOS and Android mobile apps.

What is Server-side header bidding?

When several advertisers directly connect to the header bidder wrapper, loading times increase because of the amount of JavaScript running on the page. The slowest bidder also limits the overall bidding time. To avoid this, publishers can restrict how many demand sources can bid. However, this removes the major revenue advantages gained by programmatic header bidding. One solution is server-side bidding, which hosts the auction on an external server to increase the overall auction speed. To do this, publishers can add a snippet of code and send the bid requests from the ad server to the supply-side platforms.

How does in-app header bidding work?

According to a report by mobile adtech company Inmobi, 31% of publishers haven’t implemented header bidding due to limited understanding of how it works, while 23% avoid this method because of technical implementation issues. In-app header bidding is the same principle but works without wrappers. Instead, header bidding technology has adapted to mobile using SDK integrations that generate the ad requests. A Pubmatic ebook about in-app header bidding explains, “This ad request is then auctioned in the cloud with server-side demand partners, returning a response to the client-side SDK once there is a winning bid.” There are two days in-app header bidding can work, either through direct demand to a primary ad server or without a primary ad server. The latter is usually for developers who don’t have a sales team to sell inventory.

Six advantages of header bidding

On the publisher side, there are several benefits to programmatic header bidding. In addition to greater competition and increased revenue, this method lets publishers the following advantages.

• Increase revenue: As we have already covered in this guide, header bidding can increase revenue because the highest bidder is rewarded with the ad placement, rather than relying on the ‘waterfall’ method.
• Attain greater control: Publishers have more control over sources bidding on their advertising space. They can also prioritize certain advertisers according to their overall goals.
• Faster loading times: Bidding time is decreased, allowing for shorter loading times with programmatic header bidding. Publishers can use server-side bidding for even faster loading times, offering a superior user experience. However, you will need to consider timeouts when dealing with a large number of partners.
• Know buyer bids ahead of time: Without header bidding, publishers rely on a pricing floor and the waterfall. However, this isn’t necessary with header bidding because the publisher already knows what will be bid.
• More advertisers can bid: Publishers can work with more advertisers, leading to diverse competition for the advertising space. Having a larger set of advertisers is also crucial to a company’s stability and adaptability over time.
• Better ads for users: With a more extensive set of advertisers willing to compete, your users are more likely to be exposed to ads tailored to their interests and preferences. This creates a better user experience compared to impressions without programmatic header bidding.

These are all advantages for the publisher, but buyers also benefit by accessing higher quality ad placements that would have otherwise been exclusive to a smaller group of advertisers.

Best practices for header bidding

1. Identify the value of your demand partners

   While more partners create more competition, including each partner will affect the ad’s load time. Therefore, it is necessary to identify the most valuable demand partners and analyze the maximum number of partners you can have without the load time ruining the user experience. Do this through a process of evaluating the CPM provided by partners and the latency they cause to your page. You also need to consider how often partners are the highest bidder and how often they are bidding.

2. Define time-outs for bidders

   As the ad server evaluates all bids and identifies which creative to share with the user, this can only be as fast as the slowest response to a bid request. One partner can slow the entire process, so it is vital to set time-outs for every bidder.  You can set a time limit whereby any partner who has taken too long to bid will not be considered. Specific wrappers enable you to develop these timeouts during setup — a smart way to ensure you serve an impression within the optimal time frame.

3. Shuffle your calling order for bidders

   If you have a time-out in place, the last bidders in your wrapper may be less likely to make their bids before the cap. This may frustrate partners and prevent the highest bidder from placing their bid. To avoid this, you need to shuffle the calling order of your bidders. A randomized call to bidders is the fairest way to ensure partners are not consistently excluded due to your timeout caps.

4. Switch to HTTP/2 Protocol

   Loading time is critical to header bidding, so finding ways to reduce this and optimize the user experience is essential. HTTP/2 Protocol was designed to improve page load time through the asynchronous download of web files from a single web server. This means HTTP/2 optimizes the flow of content between clients and servers. You may see an immediate improvement in page load speed by using HTTP/2 Protocol. If your hosting plan does not offer HTTP/2 compatibility, you may want to consider an upgrade. You will also need an HTTPS connection for this to work.

If you found this guide useful, you may also be interested in learning about programmatic media buying. This includes definitions for real-time bidding (RTB), private marketplace (PMP): and programmatic direct. We also have resources for app monetization trends and how to choose the proper mobile ad format for your audience.