Will Header Bidding Really Kill Off Programmatic Direct?

Header bidding is undoubtedly one of the more innovative and interesting developments we’ve seen in programmatic advertising over the last few years. Its predecessor, the waterfall system – where the sell-side ad server delivers direct campaigns first, before offering the leftovers to SSPs and ad networks one after another – was never capable of delivering true holistic yield management i.e. yield management that looks at all demand sources for a given impression. Header bidding solves that problem as it sees everything the publisher’s ad server sees (100 percent of inventory), so it can compare bids from SSPs with the publisher’s direct sales. So the publisher can then decide to give the impression to the highest bidder (if you need a more detailed explanation of header bidding, you can find some links at the bottom of this article).

Earlier this year, Jed Nahum, an independent consultant and former head of Microsoft’s global programmatic sales team, wrote on Adexchanger that he believes header bidding has killed programmatic direct. Programmatic direct is essentially an automated version of the insertion order, offering advertiser’s a guaranteed slice of a publisher’s inventory. In contrast, header bidding allows for more sophisticated data-driven decisioning and allows buyers to bid on inventory according to the data they have about a given user i.e. the advertiser is buying audience rather than inventory packaged by the publisher. Put simply, Nahum believed that the buy-side’s desire to use their data would ensure that header bidding would become the dominant method of trading in the future.

Programmatic Direct Still Has Its Place

Lisa Menaldo, Sublime Skinz
Lisa Menaldo, UK MD at Sublime Skinz

However, Lisa Menaldo, Managing Director UK at Sublime Skinz, says she believes there’s still a role for programmatic direct to play. She said, “Header bidding solves one of the biggest problems with programmatic direct — it’s inability to offer a first-look at inventory in a real-time bidding (RTB) environment. However, it doesn’t deliver the same level of guarantees or simplicity.   

“Although the increased transparency and monetisation header bidding provides may cause adoption to overtake programmatic direct, the comparative uncertainty of deals made using the technique will remain a key concern for publishers and brandsIt is therefore highly likely that we will see another new model emerge that blends the best of both tools — the value of header bidding and guarantees of programmatic direct – to ensure ultimate efficiency and profitability for all parties.”

Alex Bornyakov, CEO VertaMedia, agreed.  He said, “Technology is always a means and never an end. It is highly likely that we will see another new model emerge – that combines the value of header bidding and guarantees of programmatic direct – to benefit both the sell and buy side. Header bidding provides publishers with a monetisation opportunity, which fosters direct relationships with demand side partners (DSPs) and bypasses all other chains.

“The ad ops team on the publisher side can also use header bidding for market research by analysing the performance and cost of their inventory, or testing different direct demand rates, and building future sales strategies. Whereas programmatic direct is still beneficial as it is these direct deals that provide publishers with a constant income stream, which safeguards their future, and as a result leaves them free to focus on business development.”

He added, “While header bidding appears to offer publishers an attractive proposition, it will only work correctly and be a viable alternative solution when we reach the critical mass of DSPs integrating header bidding into the platforms. But even if header bidding does become integrated with top DSPs, large publishers won’t be able to rely on it as their sole monetisation solution.”

A Diverse Range of Demand Sources Helps to Determine Value 

Andrew Buckman, Managing Director, EMEA, OpenX, said that as header bidding enables all demand sources – including programmatic direct and private marketplaces – to compete side-by-side against each other on the same impression, it enables publishers to have a clearer picture of what that inventory is worth.

 “As more publishers move from direct sales to programmatic direct, header bidding will facilitate this trend by improving user experience and ad quality. It will also offer a first-look without the need for passbacks – bids that have not achieved the floor price so are redirected to the ad server,” he said.

He added, “In addition, programmatic direct will feed higher value demand through header bidding implementations to compete with higher value impressions in DFP First Look. Many publishers are implementing header integrations as part of their programmatic direct programme – and we expect to see this trend continue.

“We also expect to see the growth of new solutions that combine the best of private marketplaces and programmatic direct, such as real-time guaranteed. This technology is implemented into a header bidding product, which allows it to see and bid on all impressions passing through the server, and also enables audience forecasting.”

Some Useful Header Bidding Resources

  • Ad Ops Insider gave an excellent breakdown here.
  • Exchangewire’s have an excellent whiteboard session explaining header bidding here.
  • If you’re interested in how header bidding will affect video, Andrew Casale, Index Exchange’s CEO, explained to Video Ad News here.

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