Header bidding explained: Your complete guide

Introduced in 2014, header bidding ushered in a new era for the programmatic media buying of web ad inventory. Imagine attending a farmer’s market and not being able to choose apples based on their price and quality. Instead, you have to buy from the stall nearest the entrance. Only once that stall’s apples have sold can you buy from the next stall in line, and so on. This was, in a very basic sense, how waterfall bidding worked. Header bidding improved vastly upon the traditional waterfall approach of ad network ranking by providing a fairer, value-based market for both the demand and supply sides of the ad inventory auction. In this market, all stalls have a shot at selling their apples based on price and value.

Header bidding has also steadily grown as a revenue model for publishers, with 35% of marketing teams planning to launch a header bidding initiative in 2024. On the demand side, although in-app ad spend is projected to account for nearly 82% of mobile ad spend in 2024, web ad spend is expected to surpass it by $40.34 billion in the U.S. by 2025. 

Let’s explore how this simplified bidding method works and why it has become such a buzzword in mobile marketing.

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.

Header bidding is named after the JavaScript placed in the header of a publisher’s web page, known as the “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. Wrappers ensure that every partner's bid requests are triggered at the same time. They can also perform management tasks such as dropping partners from the bidding process.

There are two main types of header bidding wrappers:

1. Proprietary wrapper: Wrapper providers manage demand partners and set up. 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.
2. 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.

Once a user enters a webpage with the header bidding wrapper, the publisher sends requests to demand partners. These partners then place bids according to what that advertising space is worth to them. The winning bid is sent to the publisher’s ad server, which connects with the user and displays the highest bidder’s creative. By combining inventory into a single server-side supply, the publisher can sell inventory on a per-impression basis, providing transparency into the value of each impression.

There are several advantages to using programmatic header bidding for publishers, buyers, and users.

1. Increased revenue: Header bidding can increase revenue because the highest bidder is rewarded with the ad placement, rather than relying on the waterfall method.
2. Better management: Demand partners are organized by the wrapper, which also defines the auction rules for more control.
3. Faster loading times: Bidding time is decreased, allowing for shorter loading times. Publishers can use server-side bidding for even faster loading times, offering a superior user experience. (Note: You will need to consider timeouts when dealing with a large number of partners.)
4. More advertisers can bid: Publishers can work with more demand partners, leading to diverse competition for the advertising space. Having a larger set of partners is also crucial to a company’s stability and adaptability over time.
5. 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
6. Access to high-quality inventory: Buyers benefit by accessing higher-quality ad placements that would have otherwise been exclusive to a smaller group of advertisers.

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.

By enabling a fairer bidding process and providing access to premium inventory, header bidding not only boosts revenue for publishers but also enhances marketers’ ability to reach their target audience more effectively. The key, then, is for marketers to analyze and optimize their campaigns, ensuring they deliver the most relevant ads to the right users at the right time.

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