There’s been a plethora of content around the impacts of header bidding for sellers, but what does header bidding mean for buyers? Today, we’ll walk through how the craze of header bidding affects the demand side and how buyers should respond.
The supply side has been quick to adopt header bidding to reap benefits such as circumventing ad server waterfalls, increasing competition, driving higher CPMs and maximizing yield. Consequently, the demand side has been dragged along for the ride, and higher CPMs for media owners means higher prices for buyers. However, access to more valuable inventory seems to be built into the cost.
When evaluating the pros and cons for the demand side, it seems that header bidding seems to weigh very heavily on the cons. Some DSPs are so deterred by header bidding, they are taking the extreme measure of turning off partners with header bidding campaigns entirely. Take a look at the pros and cons we’ve been able to identify for buyers so far:
- Access to higher quality inventory: Header bidding has opened up inventory to buyers that they were not previously exposed to. Prior to the introduction of header bidding, buyers didn’t have full visibility into publishers’ inventory. Premium inventory was reserved for direct sold and private marketplace campaigns. Now, programmatic campaigns have the ability to out-compete reserved/direct-sold and traditional buys to which premium publishers already committed.
- Increased QPS: Although header bidding means increased competition, it also means increased Queries Per Second (QPS). This results in a need for increased bandwidth on the DSP side or an engineering investment in deduplicating impression opportunities. As a stopgap measure, some DSPs have turned off entire buckets of inventory to minimize QPS.
- Higher Prices: One of the main attractions of header bidding for the sell side is the increased eCPMs. This means prices will be on the rise industry-wide for the buy side.
- Faulty auction mechanics: A great source of debate around header bidding is whether to use a first or second price auction structure. Traditionally, real-time bidding utilizes a second price auction to prevent buyers from manipulating bidding strategies. However, this potentially undercuts the value of header bidding for sellers. By submitting second price bids alongside fixed priced direct sold campaigns, header bidding partners bids don’t really get a fair shot at winning the impression opportunity. Some SSPs have responded by moving to a first price auction, which brings us back to the original problem of price strategy manipulation. Both auction types have drawbacks and with inconsistent usage across header bidding campaigns, it’s a lose-lose situation.
So while buyers will have a better chance at out-competing direct-sold campaigns and more access to quality inventory, they could still miss out on these opportunities due to faulty auction mechanics. Additionally, DSPs should expect the increase in QPS and inventory prices associated with header bidding campaigns, which will in turn up the cost for advertisers. So, DPSs, ramp up your bandwidth. Advertisers, ramp up your budgets.
For even more information on the topic of header bidding, check out our header bidding page and the rest of our blog series:
- What is Header Bidding?
- What is a Header Bidder Container and How Does it Work?
- How Header Bidding Works in Video vs. Display
- Server-Side Header Bidding vs. Client-Side Header Bidding
- Should Your Company Be Using Header Bidding?
Lexie Pike, Product Marketing Associate