Header Bidding Value in the First-Price Auction World
As a company that speaks to many publishers, we hear similar questions regardless of their location and business model. In the last few weeks, our conversations have been dominated by Google’s Unified Auction and switch to a first-price auction model. One of the most frequent questions we get is what the impact of that change to header bidding will be.
To answer this question, we need to take a look at different roles that header bidding has now. Then let’s consider whether they will be affected by the change.
Unique demand (or better demand)
This is simply the most important matter from the yield perspective. More advertisers willing to buy your inventory simply creates better yield for you. The change in auction mechanics will obviously not affect the value of the unique demand.
The demand from header bidding
(even if not unique) can also improve, as there are fewer middlemen. Simply, when a buyer buys through AppNexus, it’s better to also serve the demand with AppNexus and not let another ad exchange take another cut of the commission. Direct relations with DSPs offer smaller cuts for middlemen and higher net revenues for publishers.
The demand from header bidding is also better because it goes to a publisher more directly. When a buyer uses AppNexus to buy an impression, a publisher can sell this impression with AppNexus as well or with Google Ad Exchange. Obviously, in the second case, the publisher’s margin would be lower. That’s because there are more middlemen.
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Pushing AdX for higher bids
In the second-price auction model, header bidding brings value even when AdX wins the impression. When adding more demand, header partners increase the yield by creating extra auction pressure and determine a higher clearing price. This is where the value of header bidding will be reduced most significantly. In the first-price world, it does not matter what the second-price is.
Revenue stream diversification
It’s not good to rely on only one partner, and it’s not good in the long run when the market is dominated by one player. Obviously, Google has strong competitors in Facebook and Amazon, but when it comes to the publishers’ solution, Google is a real monopoly dominating other tech players like AppNexus, Smart, Criteo, Rubicon, and others. From that perspective, header bidding plays an important role that the market shouldn’t undervalue.
The consequences
Most of the positive impacts on header bidding remain in the first-price world. Nevertheless, it reduces the value significantly as it can’t push AdX anymore. This value reduction combined with latency issues and Open Bidding development will probably push publishers to look carefully for the quality and quantity of the demand of each SSP. The partners that can bring unique advertisers who bid high, will always find a place in the marketplace. However, others are likely to get into trouble.
Partnerships & Consultancy Expert
