Header Bidding vs Waterfall | Differences Explained

header bidding vs waterfall blog cover

Header bidding vs waterfall is one of the most searched terms in adtech. The waterfall was an industry standard for many years until header bidding came and replaced it around 2014. 

This article will explain what they are, how they differ, and if publishers still use them today!

Table of Contents:

Programmatic Waterfall Explained

Programmatic waterfall, also known as waterfalling or daisy chaining, is a technique for publishers to sell remnant ad inventory.  

Publishers would try to sell their premium ad inventory via direct deals in the early days, which generated more revenue. However, they were often left with ad inventory that wasn’t attractive enough for direct buyers; hence the programmatic waterfall was developed. 

How Does Programmatic Waterfall Work?

In programmatic waterfall, SSPs/ad networks are ranked based on the average historic performance they have produced for the publisher.

This means that SSPs/ad networks with the best record of eCPM, fill rate, latency, etc. will be at the top. The impressions are then passed from one SSP/ad network to another in sequence until they’re sold.  

what is waterfall?

Waterfall Model Advantages and Disadvantages

Advantages:

  1. The waterfall model allows publishers to sell off their remnant ad inventory. 
  2. The waterfalling solution has an easy set-up as it only requires pasting passback tags from one SSP (or ad network) to another.

Disadvantages:

  1. Publishers receive a low yield because SSPs/ad networks bid on impressions in sequence instead of real-time bidding (RTB), where they bid simultaneously.
  2. Once the impressions are passed onto the next SSP/ad network (known as “passback”), CPM price floors decrease, preventing high-paying advertisers from bidding more and, ultimately, decreasing publishers’ revenue. 
  3. Since the process is long, it results in high page latency
  4. The sequential selling process results in high impression discrepancy, as opposed to where there is a single auction like in the header bidding. 

What is Header Bidding?

Header bidding, also known as pre-bid, is a programmatic technology in which the bid requests are sent to multiple demand partners (e.g., Google AdX, Xandr, Criteo) in real-time bidding (RTB), helping publishers maximize yield for their ad inventory and sell it at the highest price.  

Adding multiple premium buyers creates more competition, pushing demand partners to pay more for the same ad impressions. Header bidding also allows publishers to offer their premium ad inventory without the risk of underselling it. 

How Does Header Bidding Work?

A header bidding technology sits on top of a header bidding wrapper, which is a JavaScript tag responsible for:

  • making ad calls to demand partners;
  • evaluating bids;
  • communicating with the ad server. 

Wrappers essentially help to implement the technology and manage demand partners with ease. 

This is how a header bidding wrapper works:

  1. Firstly, publishers need to paste the header bidding code in the header of the page. 
  2. As soon as the user visits the site, the wrapper makes an ad call to all demand partners.
  3. Demand partners submit their bids. There is usually a time frame (“timeout”) in which bidders must respond to prevent page latency. 
  4. Wrapper sends the bids to the publisher’s ad server (e.g., Google Ad Manager).
  5. The highest bidder wins the real-time auction, and his ad creative gets displayed on the publisher’s page. 
how does header bidding work?

Header Bidding vs Waterfall

WaterfallHeader Bidding
TechnologyImpressions are offered sequentiallyImpressions are offered simultaneously (RTB)
RevenueNo difference over Google AdSense50-80% revenue uplift (up to 300% with Setupad) over Google AdSense
Set-UpEasyMore complex
Ad Inventory Usually remnant inventoryAll inventory
LatencyHigh latencyLow latency
Fill RateDecreases if no one buys the impressionsIncreases thanks to increased competition
CPM Impressions are sold at the CPM price floor Higher CPM because of real-time auction
Performance Control Not possible to evaluate ad performancePossible to evaluate ad performance using bid-level reporting data
DiscrepancyHigh ad discrepancy Low ad discrepancy
Demand PartnersA limited numberMultiple* 
*Setupad’s header bidding connects publishers to 15+ SSPs, including Google

Do Publishers Still Use Waterfall in 2021?

The waterfall model is not a viable solution to monetize your ad revenue in 2021. However, publishers can still use it to organize their ad inventory or test waterfall before the open auction (RTB) in their direct deals by giving certain advertisers an exclusive “first look” at their ad inventory. 

Despite its popularity, header bidding’s biggest challenge is the imperfections of the two types of header bidding wrappers: client-side vs server-side. Client-side header bidding wrapper runs on the user’s browser, which can harm page load speed.

Server-side header bidding auction takes place in the ad server, which solves the page load speed issue. However, the server-side lacks cookie matching, which is necessary for targeting, and publishers may sell fewer impressions as a result.

Where Does This Leave Publishers?

Setupad has developed its own hybrid solution, which combines bids from the client side with server-side connections, ensuring that neither revenue nor loading speed is compromised. It is also a light tag-based solution that doesn’t require pasting anything into the source code. 

According to a study, most publishers today utilize hybrid header bidding solutions, indicating that this type of setup is slowly becoming an industry standard. 

To implement header bidding, publishers should partner up with a monetization platform. They will benefit from an advanced technology suite, programmatic expertise, and individual approach. If you would like to test our solution for yourself, sign up or contact us at [email protected].

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