Programmatic buying ushered in a new and more efficient method of purchasing ad space where buyers can see all of the inventory and bid exactly how much they are willing to pay for it. Prior to the advent of programmatic buying, much of ad spend was based on a fixed or static price, whereas programmatic uses a variable or dynamic price that can change with every piece of ad inventory the buyer bids on.
Header bidding reveals the true benefits of dynamic pricing and highlights that it is the critical feature that has driven its adoption. Without dynamic pricing, header bidding would not be needed, and it was the need to include programmatic buyers within DFP that initially drove header bidding. In addition, the combination of dynamic pricing and simultaneous ad calls really brings its perks to the forefront.
Dynamic Pricing in Waterfall vs Simultaneous Ad Request Environment
In a standard waterfall setup, static pricing is not as beneficial as in a simultaneous ad call environment. A standard waterfall setup calls the buyers in sequential order from top to bottom, so if a buyer lower in the waterfall sends a dynamic price the waterfall will not be able to account for the potentially higher or lower price and re-sort them within the waterfall.
In a simultaneous ad call environment, all buyers are called at the same time so they can provide a dynamic price and they will be properly slotted by price. The dynamic price allows the buyer to bid what they truly value each piece of inventory at, and thus accurately compete with the rest of the buyers. In the waterfall setup, their dynamic price will only be useful if they are at the top of the waterfall because otherwise, their placement within the waterfall will not change even if they send a variable price.
If all buyers send static prices that never changed, then a traditional waterfall setup would yield the same outcome and revenue as a simultaneous ad call environment as long as the waterfall was ordered from the highest to the lowest paying buyer. Since header bidding utilizes a simultaneous ad call environment, dynamic pricing is the driving force of how it maximizes revenue.
Benefits to Buyers
All buyers should offer the ability to send dynamic pricing for each piece of inventory if they are competing within a simultaneous ad call environment. Sending dynamic pricing will provide buyers with the best opportunity to win the ad inventory.
Benefits to Publishers
All publishers utilizing a simultaneous ad call environment should work with buyers who provide dynamic pricing and encourage other buyers that do not do so, to build this functionality. Using a combination of simultaneous ad calls and dynamic pricing will allow a publisher to receive the most accurate price for their inventory and maximize their revenue.
The combination of dynamic pricing and simultaneous ad calls will provide the most efficient and accurate marketplace for both buyers and publishers.
*This article originally appeared on martechadvisors.com