For nearly a decade, mobile publishers and developers have relied on ad waterfalls to monetize their user bases. It’s an approach that made sense given the technical limitations of the time, but new developments are allowing for more advanced strategies to take root. It’s time for a change, and we believe programmatic mediation, sometimes referred to as in-app header bidding, is the way forward. Understanding why starts with recognizing the shortcomings of ad waterfalls.
How the waterfall model falls short
The mechanics of ad waterfalls contain a number of biases, some less useful than others. Their reliance on estimated revenue per ad impression means that demand sources with the best historical track records are given the greatest opportunity, while others rarely get the chance to prove their value. It’s a model given to both negative and positive momentum.
The top demand sources tend to stay at the top, delivering high eCPMs for the majority of ad impressions, while the lower sources are only given occasional opportunities to deliver value. As a result, publishers are able to realize greater value than if they were to depend on a single demand source, but not as much as if every source were given the chance to demonstrate their strengths consistently. These blind spots can mean missed opportunities for publishers, especially as the entire ecosystem develops a stronger understanding of who their audience is.
As mobile targeting capabilities grow, it has become easier for demand sources to determine which customers are most valuable to them. In these circumstances, a lower-waterfall network might actually be willing to pay more for impressions to these audiences than networks ranked above it.
“Waterfall mediation was a good and natural progression from the manual management of individual ad networks, but it’s proven to be inefficient when it comes to giving each demand source a level playing field to compete for the most valuable inventory.” Amit Bhojwani, Head of Partner Management, Facebook Audience Network said. “Bidding flattens the waterfall and gives every network the opportunity to compete for publishers’ inventory. ”
“Waterfall mediation is certainly widely used, but it also makes it harder for smaller demand sources to compete at a premium level — even when they have the means to pay premium prices,” Jackie Cooper, Manager of Professional Services at MoPub said. “Programmatic mediation levels the playing field by allowing all demand sources to truly target their most valuable markets in a way that is both transparent and competitive.”
For example, a premium source with a stronger track record may be willing to bid $1 for an ad impression, but a secondary network with greater knowledge of this particular user would pay $3 to reach a key market segment. If the premium network fills demand in this scenario, the publisher is missing out on revenue that was hidden behind the waterfall’s prioritization. Even worse, because the secondary network fulfills impressions less frequently, the average price that determines waterfall rankings can become volatile and prone to error.
From this perspective, waterfalls run counter to mediation’s intended purpose of maximizing publisher revenue. So what can be done?
What in-app bidding means for the ad ecosystem
Programmatic mediation represents a more effective and transparent mechanism for monetizing apps through the power of in-app bidding. Instead of prioritizing networks and contacting them consecutively, in-app bidding solutions contact each integrated network concurrently and provide an opportunity to buy the impression in a real-time auction. By offering these opportunities to multiple demand sources at the same time, programmatic mediation platforms can increase competition, maximize yield, and diversify demand for each impression.
“For years, in-app ad monetisation suffered from inefficiencies, lost revenue, and an overall lack of transparency,” Amit Bhojwani, Head of Partner Management, Facebook Audience Network said. “Impartial systems that award impressions to the highest bidder help in solving these problems directly and create new opportunities for sustainable ad businesses.”
Let’s revisit the scenario mentioned earlier — where the high-paying premium network offers $1 for an impression, but the secondary demand source offers $3. In a real-time auction, the higher bid of the secondary source means it wins the impression and pays more revenue to the publisher.
“The meritocracy of real-time bidding for in-app advertising makes a world of difference for publishers,” Jayme Farrell-Ranker, Senior Product Growth Manager at MoPub explained. “In recent A/B tests, publishers using our in-app bidding solution, Advanced Bidding, saw increases in ARPDAU of up to 45% and enjoyed the reduced overhead that comes with switching to a unified solution.”
Advertisers benefit from in-app bidding solutions as well. The transparent nature of programmatic mediation creates an equal playing field for all demand sources. It allows advertisers to leverage market data to determine whether an end user warrants increasing the bid’s value. Suddenly, the broader advertising ecosystem is more sustainable as it increases buyer confidence and matches the right ads to the right audience.
Despite the notable benefits of in-app bidding, much of the industry remains entrenched in waterfall models. Transitioning to programmatic solutions will take time, but steps can be taken to implement them more effectively:
1. Choosing the right model – Programmatic or Hybrid
Exclusively programmatic in-app bidding is not the only solution available to publishers. In this transition period, hybrid models allow publishers to monetize apps through auctions while still prioritizing direct partners. This combines the best elements of both models by allowing publishers to continue to get the most out of their existing demand relationships while providing new opportunities to experiment.
2. Auction density
Flattening the waterfall with in-app bidding is a great first step to increasing competition. The second step is to maximize the number of demand sources on your platform. Even within hybrid models, the more partners you have taking part in auctions, the greater the benefits will be for publishers and advertisers alike.
3. Reviewing your Results
When transitioning networks from a traditional waterfall integration to a bidding integration, publishers need to ensure they measure performance changes effectively. Additionally, when running a hybrid waterfall that contains both bidding and fixed price/auto optimised demand, it’s important to measure the share of voice bidding partners have in the overall demand mix, as well as the impact bidding has on non-bidding demand that remains within your app. By reviewing overall ad APRDAU publishers can best measure the effectiveness of programmatic mediation.
Ultimately, programmatic mediation benefits publishers as competition increases on a per impression level. On the flip side, demand partners get greater transparency on available supply, improving advertiser confidence and long term performance.