Good Things Often Start as a Hack: Header Bidding Q&A With Tim Cadogan, CEO, OpenX

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Since pioneering the technology several years ago, header bidding has been on the rise, with smart publishers looking to increase revenue by introducing more competition for their inventory.

In an interview with ExchangeWire, Tim Cadogan, CEO at OpenX (pictured below), believes that header bidding will continue to evolve in 2016 and drive significant growth in revenue and innovation across the industry.

ExchangeWire: The rise of header bidding, and its effect on inventory monetisation, was a big trend in 2015. Outside of pushing more demand to the pub ad server, how do you think it will evolve?

Tim Cadogan: Good things often start as a hack. If they catch fire, like header bidding did, they turn into something real. Allowing buyers to see 100% of a publisher’s inventory, and compete on a dynamic basis for every impression, rather than at a static price, the trend of header bidding will continue to accelerate and leading solutions will separate from the pack. Higher value demand from private marketplaces and programmatic direct deals will feed in through header bidding implementations to compete with higher value impressions in DFP. The technology will also be applied to mobile and video.

How are publishers increasing expertise and resources around managing all classes of ad inventory?

Significantly! Publishers are investing more in their own revenue operations teams, which are being led by the new generation of programmatic experts. Alongside building their own teams, publishers are also heavily leveraging the expertise of their publisher platform partners. Major publisher platforms have experience with hundreds of publishers, so they can see patterns and gain invaluable insights that are hard for any one publisher to observe.

How are publishers marrying yield management with traditional sales channels, and how can both inform overall monetisation strategy?

Firstly, by breaking down barriers between inventory reserved for direct or agency buyers and inventory sold through ad exchanges, or indirect buyers, publishers are making decisions about when, how often, and at what price, to serve an indirect buyer before a direct buyer. These decisions allow publishers to generate the highest CPM for an individual impression and generate maximum yield across all inventory.

Secondly, the layer of exchange demand that sits above the open auction allows publishers to sell inventory direct to advertisers using more targeted technology. So, instead of carving out inventory into a few large chunks and selling it on a traditional IO basis, publishers are thinking about maximising revenue when inventory is pre-sold in much smaller segments or even impression by impression. By specifically targeting much higher fidelity segments, or individual impressions, advertisers can bid confidently and aggressively, knowing they aren’t going to be reaching unwanted audiences.

In some ways, developing a holistic monetisation strategy is becoming a more straightforward task for publishers. As sales channels merge and targeting capabilities improve, publishers are able to offer inventory to more buyers in one super auction. The introduction of header bidding is a great example of this convergence.

Tim Cadogan Headshot

Let’s discuss an open versus closed optimisation strategy. How does this feed into holistic yield management?

Rather than just choosing between the open exchange or private marketplaces, the smartest publishers are developing hybrid optimisation strategies that fit their specific business needs. At the centre of these strategies is finding the right balance between maximising competition and setting controls, and managing that balance optimally across their sites, apps, inventory segments and audiences.

Understanding how control impacts competition enables a publisher to create and adjust their strategy to drive the best results for all types of inventory, in other words, holistic yield management. In general, what we’ve observed at OpenX, across our approximately one thousand publisher customers, is that the more revenue ops teams open up and encourage competition, the better their business runs and the better results they see, not just in the near-term but more importantly, over the long-term.

Let’s discuss the increased sophistication of revenue ops, and why a data-focused approach is fundamental to publisher ad revenue management. How has this evolved – and where are we now?

Revenue ops teams are made up of some of the smartest people at any given publisher, and they blend strong commercial instincts with rigorous analytic abilities and a deep understanding of the tech. When traditional sales teams moved to higher value deals, the primary function of ad operations shifted from classic trafficking to also encompass revenue optimisation. With that shift came more responsibility, broader scope, and a more direct tie into revenue.

At this stage of programmatic advertising, there is no one way for a publisher to sell all of their inventory. Determining the most effective approach for maximising revenue requires publishers to understand a variety of buying models, various ad formats, and how all of those perform on their different properties.

Alongside defining and executing its foundational revenue strategy, one of the key things a publisher’s revenue ops team needs to do is establish its ad tech provider strategy. Picking the right partners is becoming a key driver of success for rev ops professionals. It’s important to partner with programmatic technology suppliers who recognise, understand, and embrace the fluid environment of programmatic advertising, and are moving fast to capture maximum economic value for publishers.

In the face of the industry mantra of automation, why is a service layer on top of technology even more critical for publishers in the programmatic age?

Revenue and quality will continue to be the most important drivers in selecting a programmatic partner. However, a lack of service, expertise, advice, and collaboration can easily sway a publisher’s partnership decision. At the simplest level, the importance of the service layer is obvious: the macro optimisation decisions are made by people (e.g. choosing to execute header bidding in a particular way). Then, the technology is used to execute those decisions at the micro, real-time level. Business rules and algorithms do not write themselves, they are created by people. Talking through the choices inherent in all such decisions is a vital part of the client experience and the cornerstone of an effective programmatic product. Putting this kind of thoughtful, proactive advice at the forefront of the partnership in programmatic is a significant differentiator.

What do you see as the big trends for publishers this year?

We see several trends.

Header bidding will continue to drive a massive amount of industry revenue growth and innovation.

Next, a sustained and expanded focus on quality. The best industry players have already made significant strides in addressing concerns of traffic quality (such as bot traffic, url masking, etc) and that investment will continue. But traffic quality is only half of the equation when it comes to ensuring quality in digital advertising. Ad quality concerns are the next big topic to address, as poor ads, whether disruptive, annoying or infected with malware, increasingly become top of mind for consumers and, thus, publishers.

New buying models. For example, combining automated guaranteed bidding and real-time bidding to create a programmatic guaranteed product. By providing more certainty alongside the choice that digital ad trading enables, programmatic guaranteed buying models could provide a compelling alternative to automated guaranteed and private marketplaces.

Mobile will, unsurprisingly, continue to grow its share – both in-app and via mobile web – of total programmatic spend and the industry will get closer to solving some of the user ID issues that make the category harder to monetise.

Finally, video will become more genuinely programmatic. The reality today is that a significant percentage of video inventory is traded in quasi-programmatic ways, using business models more akin to ad networks than exchanges. We expect this balance to shift to more competitive market models this year, and publishers will benefit.

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