Header bidding is a relatively new, unified auction that publishers conduct outside of their primary ad server. Because it enables advertisers to cherry-pick high-priority impressions using programmatic ad platforms, it does a decent job of increasing ad revenue.
Header bidding has proven itself useful in organizing competition between SSPs, increasing publishers’ revenue streams.
The Single-Objective Problem
However, header bidding guarantees neither premium ad delivery nor revenue maximization. Most publishers have focused on achieving only one of those goals — that is, on a single-parameter problem. They decide either to maximize the volume of premium ads delivered, which reduces RTB ad revenue, or to deliver RTB ads first, which risks the potential under-delivery of the premium ads the publisher’s sales team committed to run.
Solving for a single objective is relatively simple. Doing so, however, fails to maximize publisher revenue.
We sought a way to reconcile the two goals. We realized that meeting both objectives would involve solving a constrained-optimization problem: maximizing revenue, while ensuring delivery of all guaranteed ads.
We needed to ensure that a new technique would not only increase publishers’ ad revenue, but also maximize it.
Solution: Holistic Yield Management
Holistic yield management provides a simple solution to the two-objective problem. It works by evaluating advertisers’ willingness to pay through detailed statistics and combines this information with inventory forecasting. Having collected valuable bid statistics based on historical performance, a sophisticated platform establishes expectations of upcoming bids. This approach molds a probability adaptation that is unique to each impression. A bid floor sets up a minimum benchmark. If a bid is lower than the established benchmark, the publisher runs the premium ad; if the bid is higher, the RTB ad is delivered. The bid floor essentially selects the highest bids.
The calculation of this bid floor requires knowing how much inventory needs to be allocated to premium campaigns. It is constantly updated to reflect changes in premium ad delivery and bid statistics.
This method guarantees the contracted delivery, while at the same time maximizing the revenue of the non-guaranteed ads. Publishers get the best of both worlds by taking advantage of their full inventory.
The Future of Holistic Yield Management
This solution has already fattened the wallets of many publishers. But that is no reason to stop iterating. There are currently a few areas that we are working hard to improve.
As Holistic Yield Management is based off forecasts, the accuracy of bid statistics and inventory forecast becomes of utmost importance. Past bids do not necessarily correlate with future bids; inventory forecasts are always imperfect. So we are working hard to develop a two-pronged solution that works even when our forecast is biased in any direction.
Because of its potentially transformative impact to the programmatic advertising ecosystem, Holistic Yield Management will remain an important area of advertising innovation. We have made a great deal of progress, and we will not stop working to improve the solutions.