This post was most recently updated on August 23rd, 2019
2016 was a crazy year for the ad tech industry. We have never seen such innovation and change in such a short time. With the growth of header bidding, reaction to the growth of ad blockers and Google responding to their monopoly being threatened, 2016 was an eventful year but expected even more in 2017. The way we see it, the industry is only heating up:
Header bidding is already big within the display ad inventories. The largest publishers are already turning down the non-header bid compliant ad networks, and smaller publishers will do the same eventually. The same strategy will happen for native discovery placements. Native in-content partners have already joined the header bid movement, and native discovery partners are starting to show interest.
Expect to see a slew of native discovery partners create adapters for the major header containers. Publishers have already tested the optimization of many native discovery partners within DFP and seen excellent yield increases similar to their standard IAB ad inventory. Native discovery ad partners will not be able to get away with pushing for exclusive access to in-page placements. Publishers will require native discovery ad partners to be header bid compliant and the native discovery placement at the bottom of articles will also be a DFP ad placement that is optimized via header bidding.
Google has been very quiet about the details of exchange bidding dynamic allocation (EBDA) but very willing to announce its existence to take wind from the header bidding sails. That, of course, was only short-lived and header bidding continues to grow. According to many in the industry, EBDA is far from a finished product and has a lot of kinks to work out before it would be a value-added offering for publishers.
Then, of course, there are the demand sources which may or may not want to participate. Some initial participants also happen to be heavily invested in header bidding. We predict that the initial demand sources and any additional demand sources that have shown interest will only partially participate. As a result, this will slow the full release of EBDA to all publishers, and Google will delay it until 2018.
We have already seen new ad request taxes from header bid networks like Rubicon. Some have been reasonable, and some have been ludicrous. The existence of an ad request tax to incent publishers to optimize their placements better to only run bidders with high win rates makes sense. It’s the header bid partners that use it as a hidden fee money grab that will lose in the long term.
By late 2017, each major header bid partner will include an ad request tax that will cover becoming unprofitable due to accounts that run too many ad requests with low win rates. Header bid partners realize how expensive their server and data costs have been with header bidding and need to account for this. IAB might even step in and provide a standard charge that publishers and header bid partners can use as a benchmark. Read your IOs carefully and watch out for any IO change announcements in 2017.
Arbitrage demand players and the lack of value they offer in the industry is still a big issue. A publisher receives about $0.30 – $0.40 on every dollar an advertiser pays to run an ad on that publisher’s site. A massive chunk of this is eaten up by arbitrage players and SSPs. The advent of header bidding has provided an opportunity for DSPs to plug into header containers by creating adapters and disintermediating arbitrage players and SSPs.
A DSP with disintermediated bids would have dramatically higher win rates compared to the SSPs that they compete against due to the redundancy of demand that exists in the header bidding auctions today. DSPs could pay less for the same ad impressions, and publishers would earn more with the same header bid setup they currently have. The tricky thing for DSPs is they would have to handle many publisher accounts. Realistically, only the largest DSPs would begin this trend and beta this with some of the largest publishers in the world. Once they show success, they will expand to other publishers, and other DSPs will follow with their adapters.
The creators of Ad Block know that the internet cannot run without ads. That would not be a sustainable solution. However, the biggest issue is how intrusive and slow ads are today. Ad networks will begin to play ball and will create a new channel of demand and tags that are Ad Block compliant. That means the demand would not have:
This type of demand would offer a better UX for users and still provide monetization for Ad Block users. The monetization would be dramatically lower though since advertisers would have the targeting features available about 10 – 15 years ago but it’s better than no ads. It will be interesting to see if IAB cooperates with Ad Block as well, but at least some ad networks will cooperate with the Ad Block recovery tech companies to be able to monetize that audience that is growing and hasn’t been able to monetize.
As you might have noticed, the predictions can be summed up as a continuation of what happened in 2016. Header bidding will continue to grow, Google will continue to fight back, the header bidding market will become more efficient, and the ad industry will come closer to find a way to live with the existence of ad blocking and its growth in popularity.
Expect Google to have some new tricks up their sleeves, but header bidding will continue to get stronger. Direct sales will continue to die a slow death as media buyers will adopt programmatic buying more exclusively. Overall, 2017 is going to be a more exciting year with more significant innovation and competitiveness in the industry. Keep that seatbelt on folks; we’re in for a good one!
He is the resident expert in Ad Optimization covering areas like Adsense Optimization, DFP Management, and third-party ad network partnerships. Kean believes in the supremacy of direct publisher deals and holistic optimization as keys to effective and consistent ad revenue increases.
Email him directly at: email@example.com
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