Header Bidding: What Is It & How Does It Work?

by The MNTN Team

Min Read

You need to use every advantage at your disposal to stand out in the competitive world of digital advertising. One of the most popular techniques is header bidding. It can be a great addition to your marketing mix and provide a new way of getting your brand in front of prospective customers.

Below, you’ll learn what header bidding is, as well as the benefits and potential drawbacks of this marketing process.

What Is Header Bidding?

Header bidding allows publishers (i.e., website owners) to offer ad slots on multiple exchanges at the same time. Sometimes called “pre-bidding,” header bidding levels the playing field by allowing multiple demand sources to compete for sought-after inventory.

Advertisers like you can benefit from header bidding by gaining access to a wider assortment of available inventory, increasing your reach, and improving audience relevance.

Header Bidding vs. Real-Time Bidding

You might be familiar with real-time bidding (RTB), as it’s one of the most popular programmatic advertising bid systems. RTB allows you to bid on ad impressions as they become available in real time. Real-time bidding operates within a single exchange, whereas header bidding allows you to tap into multiple exchanges and networks.

Header bidding allows multiple bids to occur before the ad server is called. As a result, publishers are able to get the best possible price for their inventory.

Header Bidding vs. Open Auction

In an open auction, a publisher makes their ad inventory available to the highest bidder in a single exchange environment.

Header bidding takes this a step further by allowing simultaneous bidding from multiple sources before the auction occurs. This increased competition typically leads to a higher bid, giving publishers more revenue than they would receive under the open auction model.

Advantages of Header Bidding

Header bidding has gained a ton of traction in recent years, especially among publishers. Here are some of the benefits of header bidding:

1. Increased Revenue

One of the most compelling advantages of header bidding is the potential for increased revenue. By allowing multiple bidders to compete simultaneously, the framework allows publishers to receive higher bids for their inventory compared to traditional methods.

Let’s say you want to sell ad space on your website. If you use the open auction method, lower bids might be accepted before higher offers even get presented. Header bidding eliminates this conundrum and can drastically increase your revenue.

However, it’s a double-edged sword. If you are the advertiser, engaging in header bidding can drive up prices and increase your marketing campaign costs.

2. Improved Transparency

Header bidding brings transparency to the purchasing process. You can see how much each demand source is willing to pay for your inventory, giving you better insights into the true value of your ad space. This visibility helps you make more informed decisions about which partners to work with.

You can also use auction data to understand how your site is performing as a revenue driver. If it’s falling short of expectations, consider improving your content, rankings, and layout to increase demand.

3. Better Inventory Management

With header bidding, you can manage your inventory more efficiently. By having a unified auction, you can avoid undervaluation issues. This means you can sell more of your ad space at higher prices, optimizing your overall yield.

The header bidding method isn’t just about driving up inventory value. The framework also helps you offload more of your available ad space by connecting with multiple platforms.

4. Access to Premium Demand

Header bidding opens up access to premium demand sources that might not be available through traditional methods. By tapping into multiple exchanges and networks, you increase your chances of connecting with high-quality advertisers willing to pay top dollar for your inventory.

Header bidding doesn’t just favor publishers. You can also benefit from the framework as an advertiser. The strategy gives you access to premium content you might not be able to bid on using traditional methods.

Cookie matching allows demand partners to sync user data more effectively. This feature leads to better targeting and higher bids, as advertisers are more willing to pay for impressions served to their desired audience.

As a marketer, cookie matching makes it easier to get your content in front of the right consumers during the ideal stage of their purchasing journey.

However, Google’s looming cookie ban could make it harder to track user data. The company has already turned off cookies for more than 30 million Chrome users and plans to phase them out for 100% of Chrome users by Q3 2024.

Disadvantages of Header Bidding

Header bidding isn’t your golden ticket to marketing success. If it was, everybody would abandon other auction frameworks and solely rely on header bids to fuel their campaigns. The framework has a few shortcomings that you need to be aware of.

1. Risk of Duplicate Bids

Multiple exchanges are bidding simultaneously under the header system. This means you might receive numerous bids from the demand source, which can complicate the auction and slow things down tremendously.

2. Limited Ad Requests

There’s a limit to the number of ad requests you can handle at one time. If you receive too many requests, your website will slow down and diminish the user experience. Chronic speed problems can lead to lower traffic and a tarnished reputation.

Real-time bidding helps you avoid these headaches, which is why it remains one of the top competitors to header bidding.

3. Potential for Ad Fraud

Header bidding can increase the risk of ad fraud if you don’t manage it properly. You’ll have a tough time monitoring and verifying the legitimacy of all bids, which could expose you to fraudulent activity.

How Does Header Bidding Work?

The header bidding process is somewhat complex, but all of the key steps are automated. Every time a user lands on your website, the bidding code embedded in the header of your site gets activated. It sends out bid requests to multiple demand partners. Next, these partners will submit their bids for the available ad impression.

During the auction, the algorithm will select the highest bid. That bid gets sent to your ad server, which presents the content to the user.

Here’s a closer look at the basic components of header bidding.

Header Bidding Wrappers

A “wrapper” is a piece of code that manages the bid process. It streamlines the bid requests and ensures that all demand partners have a fair chance to participate. Wrappers also help in managing timeouts and responses.

Demand-Side Platforms (DSPs)

Demand-side platforms allow advertisers to buy ad impressions programmatically. They can set a bid, audience, and budget criteria. The DSP will submit bids based on these settings, and the highest bidder will win the advertising slot.

Supply-Side Platforms (SSPs)

Supply-side platforms help publishers manage and sell their ad inventory. SSPs receive bid requests from the wrapper and send them to various DSPs. The SSP plays a vital role in ensuring your inventory gets exposed to as many demand sources as possible.

Ad Exchanges

Ad exchanges are digital marketplaces where ad impressions are bought and sold in real-time. Header bidding connects you to these exchanges to increase the competition for your inventory.

Ad Servers

Ad servers are responsible for delivering the winning ad to your site or app. They play a critical role in the bid process by managing the ad delivery once the highest bid gets picked. They ensure the right ad gets displayed to the right person.

Content Delivery Networks (CDNs)

CDNs help reduce latency and improve the user experience by ensuring that ads load quickly, even during complex auction processes like header bidding.

Learn More: DSP, SSP, and Ad Exchange: What’s the Difference?

Types of Header Bidding

Header bidding can be broken down into one of two broad categories – client-side or server-side.

Client-Side

In client-side header bidding, the auction occurs in the user’s browser. The code from your site will send a bid request directly from the browser to multiple demand partners. While this method provides better transparency, it can also increase page load times.

Server-Side

Server-side bidding occurs on an external server. This method reduces the load on the user’s browser and can improve page performance. However, you might not have as much transparency in the bidding process.

Header Bidding Platforms

There are hundreds of header bidding platforms used throughout the world. Amazon Transparent Ad Marketplace represents the most popular header-bidding technology in the world, but it only has 1.52% of the usage share. The second-most prevalent platform, Prebid, has captured 0.98% of the user share.

Get Access to Premium CTV Inventory

Header bidding is a great tool for accessing high-quality inventory, but it’s certainly not the only way to get your ads in front of the right audiences. MNTN Performance TV is a powerful CTV advertising platform that offers high-quality inventory on top-tier streaming networks.

With MNTN, you can precisely target your ideal audience and engage them with dynamic content. Schedule a demo of MNTN Performance TV to learn more.

Header Bidding: Final Thoughts

Header bidding has revolutionized the way digital ad inventory is bought and sold by enabling publishers to offer their inventory to multiple ad exchanges simultaneously, thus increasing competition and maximizing revenue. By streamlining the auction process and providing greater transparency, header bidding has empowered advertisers to access premium ad space while ensuring that publishers achieve optimal value for their inventory.