While header bidding has transformed the programmatic industry in desktop and mobile web environments, in-app advertising has not yet capitalised on this method of ad purchasing. Given the high pace of development in the APAC region, especially in the mobile sector with the upcoming roll-out of 5G services, it stands to reason that in-app header bidding will give the APAC programmatic industry a strong boost.

Writing exclusively for ExchangeWire, Alex Khan (pictured below), Managing Director, APAC at Smaato discusses the importance of header bidding, and what impact it will have in the region.

2019 is already shaping up to be a huge year for mobile advertising in the APAC region. To top off another year of impressive growth with a 44% increase in ad requests in the region, we are seeing many promising trends that can advance mobile advertising even further. A lot of these trends, such as augmented reality, are visible and truly hitting the mainstream, while super-fast 5G technology is starting to be rolled out in China and elsewhere. However, there's another big trend that will make an impact, even though it's been flying under the radar in APAC: in-app header bidding.

Once true in-app header bidding becomes a reality, it will completely change the way programmatic auctions for ad spaces are conducted. Advertisers will receive more transparency and publishers will see increased revenues. It will be a huge breakthrough, but first, the record needs to be set straight on what exactly in-app header bidding is.

What is header bidding?

Alex Khan, Managing Director, APAC at Smaato

The so-called waterfall method has long ruled programmatic advertising. With this optimisation method, buyers at the top of the waterfall are given preference for buying an ad space even before other buyers on the lower levels of the waterfall get a chance to bid. If the buyer isn't interested, the inventory gets passed down along the waterfall. The downside to this waterfall method is that some of these buyers on the lower levels of the waterfall were willing to pay more for the ad space but they never got a chance to bid. This means that the auction is not necessarily won by the highest bidder.

With this obvious flaw, header bidding was created for desktop and mobile web advertising. It has caught on completely in this space, but a true in-app header bidding solution hasn't come to fruition just yet. That should change this year.

Bringing real header bidding to apps

With all the drawbacks to the waterfall method, a solution has been sought for the in-app space. In the past couple of years, we've seen the rise of mediated auctions. Confusingly, these auctions are sometimes referred to as in-app header bidding solutions, but they're more like a diet version of header bidding.

In these unified auctions, it's only the winning bid that can compete at the exchange level. In real in-app header bidding, all bids compete transparently at the exchange level, and are given the opportunity to win the auction if their price is the highest. Mediated auctions have been a great addition to the mobile advertising ecosystem, but their impact is still limited compared to the potential of real in-app header bidding.

The reason why header bidding for apps hasn't already taken off is due to technical challenges. With the waterfall flattened, far more impressions than ever before need to be processed. This puts unprecedented strain on the technical infrastructure. The good news is that supply path optimisation (SPO) has been able to help optimise the bidding process and limit the strain. It's still not perfect, but meaningful progress has been made.

Making in-app header bidding a reality

True in-app header bidding is well on its way to becoming a reality in APAC and the rest of the world. When it arrives in the form of new SDKs for a publisher to implement, all the benefits of mediated auctions will be elevated to a completely new level. Publishers will see increased revenues and more control of their precious inventory. Meanwhile, advertisers will have greater transparency in the bidding process and get fair access to the inventory they need for each specific campaign.

This trend of header bidding might not be as visible as 5G technology or the rise of augmented reality, but it'll be making a big impact behind the scenes of the mobile advertising industry. The creation of in-app header bidding will be a big win for the entire industry and a significant upgrade over the current mediated auctions. We're looking forward to this bright future.