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Much Ado about Header Bidding

Why Google's announcement heralds a new era of maturity for ad tech industry as a whole 

· Programmatic,Digital Revenue,Ad Exchanges,Ad Tech

Header bidding has been one of the most frequently discussed industry topics over the past year and yet it’s not a new idea at all. Heralded as ad tech’s next holy grail, the functionality has been around without much fanfare for 6-7 years. It’s really a simple piece of on-page code that was initially widely perceived as a hack that contributes to page latency and carries more risk than reward. However, the landscape looks quite different in 2016 than it did in 2009.

Header bidding’s recent rise and popularity is driven by 4 main factors:

  1. Publishers needed to find new ways to increase revenue and one way to do this is to allow all of their demand partners to bid simultaneously on their inventory. More buyers competing at the same time equalled a jump in CPMs. This also works better for buyers as they have access to highest valued inventory.

  2. Shift in perception that programmatic is not just a tool to sell previously unsold inventory but rather an additional source of high value buyers that your direct sales teams could not have reached on a user-by-user basis.

  3. Ad tech players fighting for a seat at Google’s table. Google had a solution for both factors #1 and #2 above years ago with their Dynamic Allocation product where they allowed only their own exchange AdX to bid against direct sold inventory. This worked for many publishers, but it doesn’t allow other exchanges a chance to compete with AdX or direct sold directly.

  4. Rise of strong exchanges that bring valuable differentiated demand to the table. With ad tech growing up publishers and advertisers now have more strong and valid choices in their technology partners. The need to differentiate your demand and not rely solely on Google becomes real.

Essentially header bidding is a timely and necessary band-aid hack that responded to a real industry need: providing publishers with additional revenue by allowing them to compete all of their demand sources simultaneously. The downside is the implementation aspect and latency.

The realization on the part of the publishers that they need a real solution built into the platform and not a header tag has pushed Google to build a native solution in the most widely accepted ad serving platform there is.

With Google announcing yesterday that it will allow select other exchanges to integrate server side and allow these exchanges to bid alongside AdX and compete with direct sold inventory without causing latency on the page, header bidding in its current form may go away.

This is a tremendous step forward in democratizing the ad tech landscape and allowing alternative bidding technologies to compete with Google. Rubicon Project and Index Exchange are one of the first test partners. It will be very interesting to see how quickly Google adds additional partners, what are the criteria and what happens to the partners that don’t make the cut. Google still very much controls access to publishers inventory, but the rise of header bidding has forced them to develop solutions that work for everyone.

It’s too early to tell how the new system will progress, but coming together as an industry to solve problems for our clients (in this case publishers) speaks highly of our overall maturity. It’s 2016 and there are many strong ad tech partners out there (from AppNexus full publisher suite to OpenX SSP), it’s no longer just Google. We’re leaving the industry’s high school years. And hopefully the need for short term hacks like header bidding. It’s a great day for adtech.