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April 14 2017

What Is Server-to-Server Header Bidding?

Why should you read this article?

Because you will learn more about server-to-server header bidding.
Romain Job

Header bidding has been a boon for publishers looking to maximize ad revenue by exposing their inventory to as many bidders as possible. But, as with any other advance, there’s a downside.

From a purely technical perspective, the chief pitfall for header bidding is latency. Because the bidding occurs on readers’ browsers, header bidding can slow load times as much as 29%. That might be enough to scare many readers away. Consider that if it takes four seconds to load a page, a quarter of readers will move on to another site.

Moreover, the lack of control and intricacy of operations have discouraged many publishers, as they realized they would now need a dedicated resource to handle header bidding, and extra tech vendors for analytics and optimization.

It’s no wonder that publishers have been looking for improvements, if not alternatives.  And the most salient enhancement is server-to-server connections, which takes the bidding process off a user’s browser his approach sounds appealing from a tech perspective. It solves the latency issue, provides impression-level control for the publishers, and provides the most granular data access even as it streamlines the operations workflow.

But there’s a big caveat: Server-to-server connections require publishers to put a great deal of trust in their partners.

The Appeal of S2S

Despite its drawbacks, more and more publishers will check out server-to-server this year. The reasoning is simple: With server-to-server, the bidding process occurs on a remote server, which is putatively maximized for the process and will provide less latency.

It not only means a faster processing of bids, but also offers the possibility of adding more partners and thus increasing demand pressure, which should lead to higher CPMs.

Sounds like a win-win, right? Maybe. Unfortunately, most of the time the header bidding process occurs in a black box — that is, in a realm inaccessible to publishers. So, publishers have to trust their vendor partner.

While some vendors deserve that trust, the opacity of S2S opens yet another door for media arbitrage. Even an upright vendor may be tempted to tilt auction decisioning toward its own revenues rather than those of the publisher.

Arbitrage is always fueled by data access asymmetry. This is a case in which price transparency really matters. Unfortunately, few of today’s publisher platforms disclose gross prices. They tell you what you made, not what they made. On some platforms (even the bigger ones), you can’t even tell which demand-side platform is making the money — so there’s no way to properly identify business opportunities, or track the revenue split down the value chain.

Another issue is that the S2S system is based on trust between competing ad-tech companies. If you consider that most vendors run a media organization competing with the pub sales team, it looks like a viper nest.

None of these issues result from a lack of technology. Together, though, they may call for a huge change in real-time-bidding business practices.

Improved Header Bidding

A lack of transparency is the primary reason that S2S is an imperfect solution. At the same time, issues with header bidding — namely latency and bid level, control report and optimization — are being worked out. Adding wrappers can greatly increase load times, as USA Today discovered last year.

Other tweaks, including eliminating third-party JavaScript, can eliminate the latency issue.

The publishers who are rushing to S2S, then, are doing so with incomplete information. There’s really no reason to go back to opaque metrics and a lack of transparency when issues with header bidding are being worked out. Publishers have already seen what happens when they hand too much control and trust over to ad tech partners. Going further in that direction doesn’t make much sense.

If it requires a significant investment from publisher vendors to build the infrastructure and software to process server-side auctions, the technology is here to provide publishers with everything they need. But the market philosophy has to change for this to work. Transparency is mandatory. One obvious move to promote transparency would be to prevent arbitrage. By moving to a fixed-CPM model for header-bidding transactions, vendors could cover their costs and maintain their margins without any incentive to retain data or build an arbitrage strategy.

Publishers: Be sure to ask your s2s provider for 100% access to the auction data. Your provider definitely has those data — and they belong to you! And then let’s all start to figure out the right business model to make more server-side transactions happen!

 

This article was originally published by mediapost, publishers daily, March 21, 2017

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