Exchange Bidding vs Waterfall- A Detailed Comparison

Has it not become a trend to explore and experiment and break the conventions there are, to discover and invent? That has spread to all industries and sectors, and when the same fashion grew into the advertising sector, new platforms and inventories were created to ease and enhance the process and better it. One of the resultant platforms was Header Bidding, and the other such is Waterfall. Until the developing of the former, Google dominated the header bidding arena and took major advantages of the premium position that it had. They selected the very best inventory for themselves because the same was concealed from every other platform. The advent of Header Bidding has put an end to the umpteenth amount of advantage that Google initially received, and made every bid in the auction, available to everyone. This allows publishers to maximize revenue by allowing multiple exchanges to compete equally in a unified auction, where each publisher bids, with the same being visible to everyone, and the highest bid wins. Google quickly realized where they had gone wrong and created Exchange bidding to counter the growth of header bidding. Exchange bidding can be beast defined as header bidding within Google’s purview where a selected number of Exchanges (currently 12) can concurrently bid along with Google’s ADX. This article would be an assessment of the two, to analyze and evaluate the both and study their pros and cons.

Exchange Bidding vs Waterfall: Benefits

Exchange bidding has definitely given more revenue in the hands of the publishers. Since DFP is one of the best-integrated ad serving and yield management suite, enabling Exchange bidding additionally increases the overall revenue. While setting up passback tags using waterfall can be quite a time consuming, and there is always a higher chance of losing revenue for lost impressions, Exchange bidding seems to nullify all of these. Thus exchange bidding seems to overcome the inherent drawbacks of the waterfall. However, waterfall technique can still be utilized along with Exchange bidding to give priority to sponsorship line items, and use price priority. 

Exchange Bidding vs Waterfall: Ad Networks List

Exchange Bidding has 12 platforms that it has partnered with which includes MobFox, Rhythmone and Sovrn are regionally restricted to Americas and Europe only, with COMET works only in North America, and AerServ working in Americas only. Other than that, they have Index Exchange, OpenX, Rubicon Project, Smaato and TripleLift. On a Waterfall setup, the publisher has the liberty to any of the ad partners or exchanges and set them up!

Exchange Bidding vs Waterfall: CPM Rates

The CPM in open Auctions, like exchange bidding, is decided by the price the buyer is willing to pay and the number of buyers there are. The more the demand is, the higher is the hike on price and the buyers and willing to pay much more than they would regularly. If it is the first look type, the buyers pay quite a premium price but the fill rates decrease. However, if it is the regular type, the prices are usually double. With Waterfall, an increase in the revenue is assured and the same is tiered. Even though the highest tiers receive the maximum revenues, they have really low fill rates. Though as it goes down the fill rates go up and the CPM rates decrease.

Exchange Bidding vs Waterfall: Working Process

If the case is so, that a publisher was unable to sell its direct buys because those generally yield the highest CPMs, then Waterfall could be of help, if the publisher passes the impression down the waterfall to various ad networks until it is sold.  Their team would set up an ad network with a tracking tag that will execute if and when an impression is not filled, and the same is usually configured in platforms like Fallback Ads, Passbacks, Redirects, Default Ads, and the ones that are similar. Prior to that, the team would configure the premium ad network to pass back to the vertical ad network and so on. Exchange Bidding, though is slightly more complicated, where, an ad request may be sent to DFP making use of Google Publisher Tags or the Google Mobile Ads SDK and with the same, information about the user or the user’s data is sent to DFP. Making use of the information that is provided, DFP labels all eligible line items signed in the DFP ad server and selects the best possible line item to compete via dynamic allocation in the unified auction. Prior to that, DFP sends a bid request to targeted yield partners, who process their own auction and return their most competitive bid to DFP, who then hosts a unified auction to then select a winner.

While both of these are fairly good and offer a good set of advantages, but just like every coin, they too have two sides. Waterfall has its drawbacks like even though it forbids wastage of an inventory, it does not give much of a yield. Other than that, loading each tier takes time and when the same happens, and as more time passes, there is a high probability of the user not being able to see the ad. The usual problems for exchange bidding are that the yield group does not deliver any impressions, and the Ad Exchange and DFP reports do not always match. Nevertheless, both of these are really good to be used but publishers are moving towards exchange bidding as they are seeing higher yield from the same. 

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