My name is Sharon, and I love in-app header bidding (Part 1)
There I said it.
Are you still reading?
My love of in-app header bidding feels like a dirty secret. Something I should keep to myself, or perhaps something not quite politically correct. In monetisation circles header bidding is discussed in hushed tones:
“Is it working yet?”
“I haven’t heard anything, so nah its not working”
In UA circles the topic is avoided completely or if it does come up it is dismissed because “the adnetworks are not doing it”.
In my opinion there are three main reasons why those of us in user acquisition (and monetisation) should come out and push harder for in-app header bidding to become the standard solution. These are:
- Greater ad revenue from your app means more money for you to spend on UA
- REAL user level ad revenue (and no you probably don’t have it with the waterfall…..but you do with RTB!)
- The chance to get the first impression (no more guessing which adnetwork is at the top of the waterfall)
In the next three blog posts I will go through these in turn. But first lets start with how to get more revenue for your app/game.
Why should header bidding increase revenue?
Once upon a time a long time ago there was a waterfall. Not the flowing beautiful kind, the ugly flow chart kind.
In this “old” waterfall you could call your monetisation partners once. So the process of delivering an ad to a user/player went something like:
- Hey Facebook do you want to serve an ad to this user at a cost of $20 ecpm?
- No? OK
- Hey Adnetwork X do you want to serve an ad to this user at a cost of $15 ecpm?
- Yes, great!
(Well it wasnt quite like that, but you get the picture).
The result? A demand curve that looked like this:
In this simplified example Facebook might buy 1 ad at $20 eCPM, Adnetwork X might buy 5 ads at $15 eCPM and total revenue from ads will be $95.
But wait, what were Facebook and Adnetwork X actually willing to pay us for these impressions?
Facebook paid us $20, but it was actually willing to pay $25 for that user (we just never asked that question), and Adnetwork X was willing to pay $20 for 2 users and $17 for 3 users.
If we had been able to get them to pay what they thought the impressions were worth total revenue would have been $111, so we lost $16!
I feel robbed.
Thankfully the industry has moved on. Now we can call the adpartners multiple times. So now its something like:
- Hey Facebook do you want to serve an ad to this user at a cost of $20 ecpm?
- No? OK
- Hey Adnetwork X do you want to serve an ad to this user at a cost of $15 ecpm?
- No? OK
- Hey Facebook do you want to serve an ad to this user at a cost of $10 ecpm?
- Yes great!
Ok so things are better, but as you can see we are still not maximising revenue.
The ultimate goal is to move towards a demand curve where adpartners pay the price of each impression that reflects the true value of that impression. So a demand curve that looks something like this:
But the great news is, it is even better than that! These demand curves can be created for each and every user/player that your app has.
Maybe Facebook really values “Dave” and wants to pay $50 eCPM to reach him, but Adnetwork X likes “Pete” and it wants him. So the demand curve above really looks like this (and so on for all of the millions of users/players that you have):
As you have noticed the price decays with each and every subsequent impression (eCPM decay). The first impression is simply more valuable as users/players are more likely to react and install your app or game in that first impression (after that it is harder to get their attention).
Its not so disimilar to the old days of TV advertising. There advertisers would pay more to be the first ad in the break, because TV watchers are far more likely to still be in front of the tele, and therefore more likely to see and remember that ad. (After that its time to put the tea on).
So the price will decay and you will have a downward sloping curve. Whats important however is that the shape of that curve is not the same for everyone. Dave´s curve starts higher and is far steeper than Pete´s, so if we price that first impression the same everywhere, we lose money!
Of course having different demand curves for each user “sort of” existed with the old waterfall, but I would argue that it never really worked. If Facebook was at the top of the waterfall it was at the top of the waterfall for “Dave” and “Pete” (even though really Adnetwork X should have been there for “Pete”).
Now with header bidding our monetisation managers dont need to think about that. Facebook and Adnetwork X simply bid against each other directly for “Dave” and “Pete”.
Economic theory suggests that the increased competition between ad partners for:
- each and every user AND
- each and every impression will increase revenue to the publisher.
And whats more that is true even today when only a few ad partners are ready to participate in header bidding auctions.
Why? Because in today´s hybrid world we still have a waterfall (so we can´t be worse off than before) and we have layered on top of that a real time auction that must (if you have set it up this way) deliver a price equal or greater to the waterfall in order for that impression to be sold in the header bidding auction.
It is true that for the moment competition is limited. In most of the header bidding mediation platforms available (so far), competition in the RTB auction is limited to Facebook and a handful of others (and its still unclear what Google will do). It will be sometime, therefore, before we reach a fully competitive auction, and this seems to be holding many publishers back.
But it shouldn´t. Even limited competition is better than what we have today for the publishers, the users/players and the advertisers. Why?
— The publishers should see higher revenue (if they require the real time auction to deliver a higher price than their existing waterfall);
— The users/players are more likely to see ads that are more tailored to their personal interests; and
— The advertisers get more money to spend on UA (as the app now has more revenue), the chance to bid on the first impression for users/players that are in their target market, AND real user level ad revenue.
But……more on these final points next time.
Stay tuned for part 2 of why I love in-app header bidding.
