Header bidding will transform the industry for the better, claims Chris Le May, senior vice president and managing director for Europe and emerging markets at DataXu.

Facebook wants to use it to gain a competitive edge against Google, who’s responded by launching a product to compete with it. Meanwhile, publishers small and large are enjoying the increase in ad revenue it’s brought them.

Header bidding, also known as the ‘biggest trend in ad tech’, has been the topic of much debate and news in recent months – and will continue to be well into 2017. So what’s all the fuss about?

The waterfalls have their downfalls

Before header bidding, there was ‘waterfalling’, a method of buying and selling ad inventory designed to help publishers maximise revenue. By giving buyers access to ad inventory sequentially (starting with the buyer with the greatest revenue potential), waterfalling supposedly enables impressions to go the highest bidder.

But this cascade effect can actually diminish returns for the publisher. By guaranteeing a deal without seeing if another advertiser is willing to pay a higher CPM, the publisher may be underselling impressions. Waterfalling can also damage the user experience with slow page loads, due to the ad call going out to multiple exchanges at once.

Publishers get ahead with header bidding

With header bidding, all demand sources place bids simultaneously, letting publishers see the price of their ad inventory in real time, rather than an estimate based on historic average yield. Header bidding merges the demand from multiple buyers into a single, highly competitive auction, enabling a publisher to increase the value of its inventory.

The header bidding hat-trick for marketers

Early last year, a Digiday article hypothesised about the perfect evolution of the waterfall model, calling it an unreachable ‘ideal’ for publishers. What the author was describing, however, was header bidding. As publishers’ dreams become reality, what do brands stand to gain?

Though benefits for the buy-side rarely produce positives for the sell-side, header bidding will help brand marketers in three key ways:

1 – More choices, greater opportunities

As header bidding helps increase ad revenue, publishers will likely use it to make more inventory available. Buyers will benefit from a wider range of inventory, including highly desirable low session depth impressions.

2 – In-depth audience insights

With header bidding, buyers are granted a view into each publishers’ individual impressions. This real-time insight into audience behaviours is invaluable for marketers, who can enhance their digital campaign planning with a detailed understanding of exactly where their target audience spends their time.

3 – Programmatic goes premium

Historically, premium inventory was only available through guaranteed buys – defined by either price or volume in Private Marketplaces (PMPs). The inventory available programmatically, thus, was not usually the best a publisher had to offer. Header bidding promises to change this by making a publisher’s entire inventory available for widespread programmatic buying.

One crucial consideration

No new methodology is without its teething period and header bidding also carries some risks. In fact, since header bidding is like a blind auction, bidders won’t know the going rate of inventory or what their competitors are willing to pay for it—which means brands could be spending too much.

Header bidding also makes it possible for brands to bid against themselves from different ad exchanges, with similar results. Marketers can confront these challenges by avoiding oversimplified bidding strategies that may cause them to overpay.

Luckily, corrective measures in the form of buy-side tools and models will undoubtedly emerge to keep rising inventory prices in check. To a similar end, buyers will adjust bidding strategies to ensure prices are consistent with performance objectives.

Once the industry has found solutions to these early challenges, prices will normalise, allowing brand marketers to capitalise on the long-awaited marriage of programmatic and premium inventory.

Header bidding’s domino effect

Header bidding may be new to the game, but it’s already turned ad tech on its head, promising to solve the twin problems of limited inventory for marketers and limited revenue for struggling publishers.

The foundations of media planning are going to change as programmatic buying expands to include coveted impressions and premium inventory. Programmatic will no longer be home to leftover, unsold placements; instead, it will account for a far larger share of brands’ media plans.

In other words, the ‘biggest trend in ad tech’ will be more than just a passing fad. Header bidding will transform the industry for the better, bringing benefits to both the buyers and sellers.