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Header bidding is a bid-sourcing mechanic that was introduced into the web's digital advertising ecosystem in 2014-15. Header bidding allows publishers to run a unified auction for their inventory and receive bids from advertisers all at once. Header bidding is designed to replace the "waterfall" method of serving ads, wherein bids would be requested from ad networks in the order of the historical CPMs they had paid out to that advertiser. This video does a very good of explaining header bidding and its benefits over waterfall ad serving:
Header bidding was introduced into the advertising ecosystem on the web for a number of reasons. The first is that the waterfall method is simply inefficient: the ad network getting the first opportunity to bid on inventory on the basis of historical paid CPMs might not pay the most in any given instance. A second reason is latency: daisy-chaining calls to ad networks together adds time to the process of filling the ad.
But the third and major problem that header bidding was designed to solve was the amount of control that publishers' ad servers (namely, Google DoubleClick) had over the ad serving process. Google runs DoubleClick For Publishers (DFP) and an ad exchange, AdX, and publishers felt that Google's ability to both manage the serving process and actually serve ads created a conflict of interest that kept yields artificially low.
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