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Header bidding heads to connected TV

Ad Age 13 Jan 2020 10:00

Header bidding gained momentum in 2015 as a hack that allowed buyers to bid on the same display inventory at the same time through programmatic. The trend ultimately gained enough traction that tech titans including Google, Amazon and Facebook rolled out similar products. Now, it’s making inroads with connected TV. 

Companies including The Trade Desk, FreeWheel and Amazon have embraced header bidding as the future of how inventory across connected TV will be bought and sold.

Mass adoption and advancements in the tech are enabling connected TV to be bought programmatically. Networks, meanwhile, are likely to see revenue gains for their ad space similar to those seen by publishers who implemented header bidding for display advertising. 

Although it’s very early days (as in, really early), companies believe the tech has the potential to upend the $70 billion TV market. 

“There is nothing I’m more excited about, nothing more game-changing than what is happening with connected TV,” Jeff Green, co-founder and CEO of The Trade Desk, said in November during the company’s third-quarter earnings call. “All [streaming] providers will have to explore ad-funded models. Linear TV is fighting for fewer viewers while costs are going up, while competition on streaming is becoming more intense. It’s a ticking time bomb.”

The Trade Desk recently inked deals with players including Amazon, Disney, Comcast and Roku. Amazon has also brought its own solution to the market, while Roku is expected to join the fray. 

Traditional media companies like Discovery are also experimenting in the space. 

What is header bidding?

For decades, buying and selling digital media meant using direct sales or through a waterfall method—in which media buyers are placed in tiers based in part on their collective buying power. Those in lower tiers pay less for media, but can’t bid unless higher-tier buyers decline to bid on any given impression. Lower tiers also mean access to less desirable inventory. 

This resulted in publishers getting fewer bids for inventory, while advertisers couldn’t bid on all available media. Header bidding changes that, allowing everyone to bid on all inventory at the same time, which also drives revenue for the seller. 

Discovery is already seeing requests from advertisers ahead of the upfronts, when networks look to sell a bulk of their inventory for the following season, says Jill Steinhauser, senior VP, ad sales planning and distribution, Discovery. 

“I understand why the buy side wants to move in this direction,” says Steinhauser. “It happened quickly, but we already had the policy and consultative conversations with our partners from the last cycle so we were prepared.” 

Could prices fall?

Discovery, whose portfolio of networks includes Animal Planet, Food Network and HGTV, began working with The Trade Desk last year to implement header bidding for its content.

Steinhauser says the company has seen “nice” growth in regard to revenue captured from header bidding and connected TV, while declining to share specifics. Discovery has opened up only some of its connected TV inventory to be bought in this way. 

A concern is if connected TV fully embraces header bidding, as display did years ago, prices might fall for a publisher such as Discovery, Steinhauser says. “This is for the big screen in the house and it should command premium pricing,” she says. “Adding a layer of automation is a great thing, but [unlike display], you have TV-quality inventory.”

Other problems, including consistency, remain. Steinhauser says companies including The Trade Desk, Amazon, SpotX and Freewheel all offer header bidding and that “everyone has a different flavor.”

“They are all looking at header bidding differently,” she says. “It is very nuanced as to who the parties are and what they are doing.”

How does this impact connected TV?

Connected TV, which includes content that streams from platforms like Roku, Apple TV and Hulu, has predominantly been sold through direct sales. Not all inventory has been available to all buyers. Header bidding is the alternative. 

“All impressions are made available on the demand side and all media buyers can bid on those,” says Tim Sims, senior VP of inventory partnerships at The Trade Desk.

Over time, Sims believes companies will be able to predict how much an impression is worth, or which audience segment an advertiser should target—information that it could then provide to the media buyer. 

It also brings benefits to the consumer, according to Sims, who says allowing everyone to compete on equal footing for commercial time will result in more ad diversity and mean audiences will see a broader mix of commercials.

Header bidding in CTV began seeing adoption only in late 2019. Sims declined to share specifics as to how much revenue broadcasters are generating. While the tech sounds promising, there are skeptics. 

“Our habit as digital people is whatever happened with digital will happen with TV,” says Joanna O’Connell, an analyst with Forrester. “My point is, not necessarily. The parameters of supply and demand with TV are different, and digital people have a tendency to ignore all of that.” 

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