Header Bidding: 5 Videos, 8 Numbers, and 12 Remarks You Should Read

The Industry Index Header Bidding Roundtable Roundup

Every month, Industry Index gathers MadTech leaders to discuss trends, hot topics, and new technology in the industry. We’ve written recently about Header Bidding (see the exchange shakeup and winners and losers) and that was before we decided to to open it up to some key industry players at our recent Roundtable to sort out where it’s all, er…. Headed.

Here We Go…
Header bidding is not a brand new idea, But from all the chatter, it sure seems like it.  Kelvin Pichardo, Director, Product Marketing at PubMatic, thinks the growth is directly related to the functions that header bidding enables, more so than the mechanics behind having a tag in the header. He was kind/smart enough to break it down for us:

The Complexity Is Simple.
Header bidding exposes all inventory to a large cross section of demand simultaneously, and more competition has improved CPMs. But with demand comes a huge pile of problems additional complexities. Latency, cookie syncing… along with the simple complexity of deploying a header bidding solution.

 

Browser-Bashing
According to Maggie Neuwald, VP, Enterprise Accounts at MediaMath, “With browser-side, there is a limitation of the number of calls and, due to second price auctions, it isn’t a unified market.” Yes, browser-based solutions afford publishers a significant level of control, but the highest bids don’t always win thanks to inefficiencies found in putting the auction load on users’ browsers.

What’s interesting is the effect that users are unaware they have in header bidding auctions, as calls are originating from their machines. Doug Lauretano, SVP and GM at Media.net stresses that these are individual calls happening to individual demand sources. “We threw out the word latency…  browsers weren’t made to operate like this. Browsers were made to show content to users – not to do these complicated AdTech calls. Hence the shift – that’s why server-side is important.”

There Is No “I” in Header Bidding
Header bidding cannot be viewed as a, “set it and forget it philosophy,” offered Michael Hannon, VP, Yield and Revenue Optimization at Purch. There needs to be total transparency when it comes to pageviews, bounce rates, demand sources, DFP, and pulling relic data on a daily basis. There should be a proactive acknowledgment of the responsibility that publishers have in implementing header bidding. Stephanie Layser, Director, Advertising Technology at News Corp stated that, “For too long we have been looking at engineering and page experience separately from advertising, and that’s where we have gotten ourselves into a lot of issues. If we start looking at ourselves – on a daily basis – holistically, and getting our teams working closer together, there will be better communication.”

You Lose, SSPs
The consensus from all participants was that SSPs have lost. It will be more than a challenge as they try to differentiate themselves with the supply amongst publishers looking exactly the same from one to another. First “latency” was a trigger word, then “commodity”… SSPs could have used a safeword…

Layser was the first to be predictive: “There is inefficiency in [browser-based] header bidding. I also believe that once you move to server-side header bidding that the SSP model collapses — but I believe that people will have one partner that will have direct integration with different DSPs. But the question is — people used to use one or two SSPs anyways, so are we just collapsing back to just one SSP? I don’t know exactly what it is. I tend to hope that the future has less to do with getting demand from other people and using their third party demand, and  more of it has to do with utilizing publishers first-party demand and the relationship that they have with their users.”

 

Big Cookies
Moderator Jonathon Shaevitz addressed that we cannot have a header bidding conversation without putting Google… (and Whole Foods Amazon) in the middle. The room chattered with recognition, and after a brief pause and some darting eyes across the table, he then noted that Facebook also has to be included to ensure that the conversation stays proactive. More darting eyes. More nodding.

Neuwald stated that when working with a variety of DMPs, there is a loss of data that is related specifically to cross-device, person-based identification… that’s the information of true value. Ahem. Layser added, “The biggest value is the ID, knowing that this is an addressable person. That is the greatest value that they (Google, Amazon, Facebook) can identify and the smaller guys don’t have that as much.”

It seems that the tri-opolies (you read that right) may always be at the forefront of MadTech. This comes up at every single Roundtable, and Layser gets the credit for this field goal: “Everyone’s digital ad growth is 1%, where Google and Facebook is around 40-50%.” Boom goes the dynamite.

I Might Like You Better If We Tech Together…
Data is important, but doesn’t mean anything without cookie matching. Megan Latham, Global Head of Advertising Operations at Bloomberg believes that cookie matching across platforms needs to be addressed and implemented.

Neuwald adds that, “The only limitation is just cookie matching and we see up to 90% matches with our partners… so it’s something that is easily solved. It just requires standards, transparency, trust, and some coopetition (you read that right, too), which this industry is luckily good at. But we need to up the ante on people-based identifiers, and this is a long term strategy.”

 

By the Numbers
Participants were asked to pick a number, any number, they deemed relevant to the current state of header bidding. Here are the highlights… make sure you give proper attribution as you throw these one-liners out at your 4th of July barbeque:

  • “Every 1 second delay in a page load can result in a 7% decline in sales – per second – and 16% decline in consumer experience.” — Maggie Neuwald
  • “Marketers who have adopted a full-funnel approach have seen a 532% ROI increase, based on a Forester Economic Impact Study.” — Maggie Neuwald
  • “There are between 4-6 million queries per second that some DSPs listen to.” — Ari Paparo
  • “When you think that header bidding hit a tipping point about 2 years ago, and the amount of traction it’s gotten, across all forms… it’s really upended an industry in 2 years. Makes you wonder what the next 2 years will look like.” — Doug Lauretano
  • “On average, 385 individual calls are needed to load a single page (of a sample of about 20 different premium publishers’ websites.) That includes images, text… everything.” Doug Lauretano
  • 13% of impressions go to the private auction space. This needs to grow to bridge the gap between the publisher and the buy-side to pull the buyer’s further up the yield curve.” — Matthew Lehman
  • “$45.9 billion is predicted to be spent in programmatic display by 2019, and will count for 84% of US display revenue, which shows why there are 636 vendors out there – because the money is being generated and people are jumping on the wagon.” — Megan Latham

We Don’t Need No Stinking Badges…
Our Roundtable was certain about one thing: Header bidding (despite the valiant efforts of the Roundtable) is still complex, and still evolving. We managed to scratch the surface together, but left a few things on the table. One thing that wasn’t addressed: AdWeek recently reported, ”The IAB Tech Lab announced an initial outline for what it’s calling ‘Standard Header Container Integration with an Ad Server,’ a nine-page document from the Header Tag Task Force.” (Emphasis ours.) Seriously… we hope they get uniforms and badges. That’s our prediction, anyway.


The Header Bidding Crystal Ball


Have a Great Summer, Don’t Ever Change…
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Header Bidding: Threat or Savior?

HEADER BIDDING: WINNERS AND LOSERS
Header bidding is washing over the AdTech ecosystem faster than any other tech, leveling the playing field between pubs and exchanges. Need the basics? Read these primers from Digiday and Adprofs, or our recent blog, for a quick history.

Adoption rates among US publishers are incredibly high – reportedly at 70%+. Big numbers – who are the winners and losers?

WINNER — PUBLISHERS
Header bidding is exploding because publishers reason (often correctly) that they are getting screwed by the second price auction and the intermediaries who may be rigging the system. Via header bidding, publishers are able to bypass the waterfall of exchanges, which increases overall eCPMs, provides more control over inventory, and relegates exchange(s) – mostly AdX – to sell “remnant”.  

Though there is some disagreement on the stats, header bidding on guaranteed inventory has increased eCPMs by at least 20%. For non-guaranteed inventory, header bidding has seen a 50% increase.

There are two reasons for this, with equal weighting:

  1. Header bidding exposes ALL inventory to bidders, rather than restricting visibility to unsold/remnant/low priority — high-value inventory competes with guaranteed demand.
  2. Bids through the header are passed from DFP to AdX, creating floor pricing. This increases eCPMs for AdX-sold inventory.

LOSER – PRIMARY EXCHANGES
Exchanges are struggling to catch up as win rates decline through increased competition. One needs look no further than the recent stock price collapse of Rubicon, who reported that header bidding is the primary culprit in their recent earnings calls (and which resulted in hiring Michael Barrett, a consistently successful CEO with outstanding reputation of selling the companies he walks into.)

PubMatic was also late to the game, resulting in a lull – though they have recently joined the fray and are appearing to be gaining momentum.

AdX, the largest of the primaries, is certainly a short-term loser, at least. Due to the new floors header bidding has created, AdX is able to sell inventory at a higher price. However, the volume of quality inventory has dropped, with the best inventory being snatched-up quickly in the header bidding cycle.

Then there’s Google… who I would never count out. While their response is developing, header bidding is also threatening their core ad-server dominance. But, Google is encouraging publishers to explore competitive ad-servers that have built-in programmatic capabilities, as opposed to DFP, in which the exchanges are separate systems.  

AppNexus seems to have woken up with their open source solution, prebid.org, but it’s too early to be certain how they will factor long-term, although they are clearly gaining steam.

WINNER — SECONDARY EXCHANGES
Secondary and tertiary SSPs/Exchanges – traditionally the third, fourth, or fifth calls on the remnant inventory chain – were used to seeing inventory picked-over by AdX, AppNexus, Rubicon… Thanks to header bidding, these smaller SSPs and exchanges can offer the same inventory, at the same time, as the big exchanges, and compete on price and service. Now, it’s the biggest exchanges (with the noted exception of AppNexus) who are scrambling to catch up.

Certain other exchanges, in particular OpenX and Index Exchange, made big bets early on in the header bidding model. SOVRN has also fared well through this upheaval. SOVRN sees 100% of a given publisher’s inventory, and their volumes and eCPMs have increased. And yes, they also incur ‘listing fees’ for 100% of the inventory — but the top line is exploding.

WINNER — DSPs
While they encounter significantly higher listening costs to manage the huge volume of increased impressions, DSP’s now see all of a publisher’s inventory. This visibility includes the most valuable impressions, driving up CPMs and overall sales, even as win rates are lower due to the massive amount of visible inventory.

LOSER – NETWORKS
Networks have been in decline for many years – header bidding is not a single, fatal blow. What’s more: a number of networks are still competing successfully, both integrating inventory into exchanges and leveraging data.  

However, header bidding is going to ultimately subsume what is left of the network marketplace. Some will emerge stronger by managing header bidding solutions for smaller publishers, but those who are primarily aggregating inventory will likely be destroyed.  

THE BIG QUESTION
How will the emergence of server-to-server header bidding impact the adTech landscape?

Short term, it appears to not only help publishers, but also favor smaller exchanges.  

Server-to-server header bidding is, essentially, a publisher selecting one exchange and giving that exchange all of their inventory. The publisher is then not only seeing the “unsold,” but 100% of the inventory (like all header bidding). However by doing so publishers are opening themselves up to many of the same transparency problems of yesterday’s exchanges. Plus, cookie-syncing issues are emerging with server-to-server solutions (not to worry here – these issues will be fixed.)

The biggest publishers with the highest-quality inventory don’t need an exchange. Companies like Purch have already tackled this, and we are seeing the emergence of other companies stepping unto the breach to support publishers, deploying their own server-to-server solution.  

I suspect the biggest and best publishers, used to working with a healthy percentage of media spend, will migrate to a fully-transparent server-to-server model. This will force the exchanges to become more transparent, change their pricing, and provide different levels of service. Publishers will jointly create a cookie-syncing solution, and eventually attract the largest DSPs to bid directly – nary an exchange in sight.   

Exchanges will be forced to provide their services to the mid- and long-tail. While some may survive, many will fail. The exchanges who do survive will likely be those already focussed on the long tail (think: SOVRN) versus those competing for the comScore 200.  

I am left with the thought that perhaps the exchanges and SSPs will (ultimately) win — in the short term with all publishers, but in the long term, perhaps only with smaller publishers. There are many exchanges – some are focussed on a more vertical approach (think: mobile or video) and others on providing higher-quality service, trying to differentiate themselves in other ways. What’s more: The biggest exchanges have always been “display first,” and their business models will come under increased pressure as header bidding tech becomes more ubiquitous.

Plus, we cannot overlook the benefits of deploying one’s own solution, extending further into the market.

ONE STEP AT A TIME
Sure, header bidding doesn’t fix many of the other problems with the programmatic marketplace (fraud, walled gardens, viewability, effectiveness…) but this shift is returning some pricing power back to independent publishers.

That can only be good for the industry.

…WE’RE JUST GETTING STARTED
Industry Index is exploring server-to-server v. browser-based header bidding solutions at our upcoming Roundtable, with some of the smartest names in the field. Jonathon Shaevitz will moderate. Get your tickets here.

Content Roundup: Squad Goals — Naming Your AI — Tasty Charts and Graphs

Here’s some of our fav MadTech news from the last two weeks — pubs & techies team up to solve targeting issues, proper care and feeding of your new AI…  And if you missed out our OTT Roundtable, catch up here.

Anything juicy want to share? Tell us on Twitter, Facebook… or button it up on LinkedIn.

SQUAD GOALS!

TV Industry Mobilizing to Secure Its Fair Share  AdExchange, May 15, 2017
Fox, Turner and Viacom recently announced an audience targeting alliance.
#targeting #consortium #publishers #adtech

MadTech v Goliath Media Post, May 4, 2017
Team sports continue as tech throws-in to rival Facebook and Google on the targeting front.
#targeting #adtech

PROPER AI PARENTING.

Why Tech Companies Like IBM & Amazon Give AI Human Names  Adweek, May 24, 2017
Watson, Alexa to Einstein (and the disappeared Hemingway) – Who named these AIs?
#AI #ibm

Salesforce CEO Uses AI to End Internal Politics  Business Insider, May 18, 2017
Executives face being pointed out as needed specific attention by the company’s AI Einstein…
#AI #salesforce

TWO TOO BIG?

Google Knows When Its Users Buy Stuff  The Washington Post, May 23, 2017
Google’s hands are now on billions of credit card transaction records. They “declined to detail how the new system works.”
#o2o #privacyIssue #google #PII

Facebook & Google Dominate Web Traffic, But Not the Same Business Insider, May 24, 2017
80% of referral traffic comes from just these two – Facebook for lifestyle, Google for tech and business. Do you agree?
#referral #monopoly

THE MORE YOU KNOW…

The State Of Programmatic Direct In 4 Charts  DigiDay, May 16, 2017
Due to open-exchange being “a proverbial black box,” programmatic direct ad spend has increased 50% in 5 major countries from 2015 to 2016. And publishers are moving away…
#programmatic

UPCOMING INDUSTRY EVENTS

June 6 – 8  /  Social Innovation Summit, Chicago, IL

June 7 – 9 /  99U Conference, New York, NY

June 17 – June 24  /  Cannes Lions, Cannes, France

June 21  /  Roundtable: Header Bidding, New York, NY