Thought Leadership

The Programmatic Tug of War: How Header Bidding Can Help Us Drive Real Change

Sonja Kroll

Exchange Wire
October 12, 2016

The technological battle for supremacy in the world of programmatic advertising shows no sign of abating. In fact, ever since the move from print to digital, it’s become a perpetual tug of war between competing parties with very different ideologies over how the industry should evolve. Gareth Shaw, VP programmatic operations EMEA, PulsePoint, goes back to basics with a look at header bidding and what it can do for publishers.

For publishers, the tug of war in programmatic has not been particularly helpful, given the uphill battle they face today as the traditional advertising waterfall continues to break down. This increasingly competitive marketplace, fraught with challenges from ad fraud to ad blocking, has left publishers in a position where they are constantly striving for better yields, and still aren’t quite there yet. As anyone on the sell side facing this challenge would tell you, what publishers need most right now is practical advice and, equally, practical technology solutions.

This gap in the market between the demand and sell sides has created a power struggle in the control over programmatic transactions that actually began back in the move from print to digital, when publishers lost control over inventory; some brands started paying less for more impressions, and premium brands were left trying to compete. The outcome was simple: the auction process is flawed – publishers now need to be able to access higher bids from multiple demand sources to allow their top brands to compete and to increase their own yields.

Taking this into consideration, it’s not surprising that this imbalance has served to fuel the emergence of better integration technologies such as header bidding. These technologies, undoubtedly, have the potential to change the programmatic landscape. In fact, header bidding has been the buzzword from the very start of this year, billed as the technology to help level the playing field. But, how does it actually work in practice for publishers?

Back to basics: Forecasting

First, let’s take a step back to talk about the importance of forecasting – both then, and now. Forecasting is critical for direct-sold inventory to help publishers understand what revenue they want to contractually obligate themselves to. When publishers provide inventory availabilities for direct buys, there has, historically, been little need to consider programmatic demand, as ad servers first honour the direct-sold deals before allowing open exchange and private marketplace deals to run. This is starting to change with two newer types of programmatic buying – automated guaranteed and header bidding. With automated guaranteed, the ads are booked at the same priority level as all of the other direct-sold inventory, meaning the forecasts need to be accurate and the inventory managed so it delivers in full.

Impact of header bidding on the sales strategy

With header bidding, publishers have access to enhanced analytics, which are useful to forecast estimated eCPMs. Publishers can strategically evaluate their programmatic inventory’s performance and optimise revenue by looking at bid landscape by demand source. Here, both fill rates and eCPMs multiply in relation to open exchange demand. As programmatic eCPMs and fill rates approach, and even exceed, direct-sold demand, this causes an increasing number of publishers to prioritise their programmatic sales efforts on par with, or even ahead of, the needs of their direct-sold inventory. If a publisher has an ad unit that performs better programmatically than via the direct sales team, they may rebalance the ad loads to take advantage of this. The sharp programmatic demand from outstream video is one example of where programmatic might outstrip traditional sales methods. This rebalancing necessarily impacts forecasts for all site inventory.

But, what happens when header-bidding eCPMs start to match direct-sold eCPMs for standard ad placements?

This is where things get interesting; and where we think the industry is moving towards – with direct sales teams focusing on monetising the out of the box, splashy, custom campaigns, that are often resource-intensive to forecast and manage. As such, publishers should start to consider three ways to evolve sales strategies as programmatic eCPMs from header bidding rise and start to reach direct sold eCPMs:

1. How their sales teams and ad stacks are set up

2. Which buyers their direct sales teams should approach first

3. Which types of inventory to prioritise as direct versus programmatic inventory

Header bidding is certainly a stepping stone to achieving a more exciting advertising ecosystem, with truly unified auctions and fully transparent marketplaces where advertisers have access to all inventory available and publishers can, finally, truly maximize yield. Everyone gets a fair deal; everyone is happy. The ball is in the publisher’s court right now – but it’s us, the industry as a whole, who have to pitch in and help them drive this change – from buyers to their sell-side brothers and sisters.

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