Header Bidding: The Turf War for the Auction

This post was most recently updated on September 5th, 2019

Since the dawn of Google AdSense until about 2015, there was no question who owned the display ad auction. The combo of Google AdWords and AdSense had established a stronghold within the online advertising industry. Once legitimate AdSense alternatives started popping up, publishers became more sophisticated and started using ad servers like OpenX, AdTech, and DoubleClick. Google followed this up by making a smart strategic move by acquiring DoubleClick.

This acquisition evolved into DoubleClick Ad Exchange which is still the best display ad demand source in the industry and the most widely used publisher ad server: DoubleClick for Publishers. With the integration of the two technologies and the free offering up to 90MM ad impressions per month, there is no viable alternative ad server for most publishers. This resulted in Google’s uncontested ownership of the auction.

Enter header bidding…

However, since the acceleration of header bidding, the auction has finally been decentralized. Header bidding has been around for years but hasn’t gained strong momentum amongst the top publishers on the net until 2015. The introduction of header bidding has created a new auction before the ad server auction which in over 9 in 10 cases, Google runs.

Read: What is Header Bidding [an Infographic]

Since header bidding has taken the first auction out of Google’s hands, which decreases Google’s control over the auction. DFP still chooses what ad impression wins at the end of the day, but Ad Exchange under dynamic allocation via DFP does not have a huge advantage over what they had against legacy networks. What does this result for Google? The lower share of voice, less access to the most valuable impressions and lower overall revenue for Google. Google’s firm hold of the market has been contested by header bidding and they don’t like it.

Early challenges in header bidding

Google has done a good job to poke holes into header bidding technology through some of the challenges native to most header bid solutions:

• Slow page speeds
• Decreased ad viewability because ads have to wait longer for header bidding
• Lack of a secure means of communicating bids and user info

Header bidding is a relatively new technology and innovation has fixed or is fixing the above issues. Header containers have introduced timeouts for bid requests and forced header bid networks to bid asynchronously so that content does not wait for ads. That means users wait for content the same amount of time with or without header bidding on the page.

Header container innovation has also enabled lower timeouts with minimal time out rates from header bid networks. Header bid networks have also been pushed to become more minimalistic with their adapters. This has led them to cut the fat from their header container adapters which have led to lower average bid responses.

Bid encryption and closer server to server header bidding integration have increased the security of transferred data. The innovation of header bidding has been the most rapid innovation that the ad tech industry has ever seen and these early weaknesses are being solved and might even evolve into strengths in the long term.

How does Google counter header bidding?

Even if header bidding innovation will solve their early weaknesses, that won’t stop Google from trying to smother it and decelerate the market penetration of their competitors. In reaction to header bidding, Google has made the following strategic moves:

• Started charging for non-Google ad impressions on DFP (Above 90MM ad impressions) on a widespread basis.
• Introduced Google AMP to increase mobile page speeds without header bidding compatibility.
• Offered Google First Look which is positioned as a header bid solution.
• Launched exchange bidding in dynamic allocation (EBDA) outside of Google demand beta as an alternative to header bidding.

These are major hurdles for header bidding, however, Google’s plans might not eliminate header bidding totally, for the following reasons:

1. The new charge makes header bidding more expensive, however, header bidding impressions monetize with such high RPMs that the DFP CPMs are almost negligible.
2. Publishers have pushed back on Google AMPs choice of not being header bid compatible. This might push the top publishers to adopt other alternatives that produce the same results as Facebook’s offering or in-house custom mobile builds that are header bid compliant.
3. Google First Look is merely a method of guaranteeing ad inventory for Google advertisers that no other demand source (header bid network or not) could compete for. The use of Google First Look does not decrease the utility of header bidding.
4. Many non-Google demand sources will prefer not to work via Google’s dynamic allocation because they will charge a revenue share and will have tiny timeouts that will give Google an immediate advantage in the auction since many demand sources would timeout the majority of the time and not be able to compete against AdX for most impressions.

The battle for control

This will be an interesting battle for control of the auction. It is hard to tell what will transpire with many parties involved in this war, but it is certain that the auction will not be as centralized as it used to be under Google’s watch. Header bidding and dynamic allocation for non-Google demand are two great options for publishers. These will evolve into complementary optimization tools for publishers and should not require mutual exclusive use.

Even within the header bidding market, there are many players battling for control of the header bidding auction. This is especially so with header bid networks that have the incentive to control the auction and give their demand the upper hand on winning a larger percentage of bids. So far, the below header bid networks have created header containers to facilitate the full header bid auction for publishers:

• Index Exchange
• Sovrn
• Pubmatic
• Yellow Hammer
• OpenX
• Yieldbot
• Komoona

Read: Who are the Best Header Bid Partners? A Publisher Survey

There are many more and the above are only the earlier header bid networks that offered header containers and there are many more to come. Many of these header containers are free to use and it’s up to the publisher to devote hundreds of developer and ad optimization expert hours to integrate into their sites and then iterate with very little support.

Why are most header bid containers FREE?

Why do these header bid networks offer such a useful technology for free? At first, this seems gratuitous but after looking at incentives it becomes obvious that they want to regulate the auction to control the playing field and have the following benefits:

• See all competitors’ bids requests, bid RPMs, timeouts to enable one-sided optimization to outbid competitors by pennies.
• Minimize timeouts of own header bid demand by integrating with the same server as the header container and engineer a setup not replicable by competing header bid networks to minimize internal bid response time.
• Control which header bid network is compatible and which is not. Direct competitors can easily be kept out with control of a header container.
• First access to private marketplace buys before any other competing header bid network.

It is clear there is huge strategic value to being in control of the auction for any player with a demand source. Google has gotten away with it for over a decade. It is like being in a turf war but having control of the environment like the terrain, weather, temperature, altitude, and ecology. With such omniscient power over the auction, any competing players do not have a chance.

What’s in it for publishers?

Competition is good for publishers and a decentralized auction controlled by multiple parties or one party that does not have a conflict of interest would be the most efficient for the market. That means that the actual highest paying advertisers win the bids and publishers sell their impressions to the highest bidder. In theory that would be great, however, no market is perfect and this could merely be a far-fetched dream for publishers. Either way, buckle in folks! The ad tech industry is in for a huge facelift in 2016.

Related Read: All you need to know about Header Bidding & MonetizeMore Demand

If you want to do header bidding without the heavy setup and a guarantee of a truly fair auction, then sign up to MonetizeMore Demand.