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Deconstructing the In-App Bidding Landscape [White Paper]

  2. 2DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE In-app bidding was one of the most talked about topics in the AdTech space last year, with major ad networks launching their own products, such as IronSource’s LevelPlay or Chartboost’s Helium. However, in-app bidding has been available for a while before this with programmatic players launch- ing solutions in 2018 - such as PubNative’s HyBid and MoPub’s Advanced Bidding. As mobile header bidding rapidly advances we’re taking a step back to look at where it all began in order to predict how it will advance in the coming years. HOW IT ALL STARTED: HEADER BIDDING ON DESKTOP WHEN “HEADER” BIDDING CAME TO MOBILE INDUSTRY QUOTES & INSIGHTS LOOKING AHEAD: WHAT’S NEXT FOR IN-APP BIDDING?
  4. 4DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Header bidding has its roots in the desktop world, which allowed publishers to deprecate their old monetization setups, such as the waterfall, and offer equal access to their inventory to all monetization partners/exchanges. This meant that with one (header) unified auction running directly on the page, multiple ad networks could be competing at the same time for the same impressions. The procedure maximizes the price publishers get for their inventory. At the same time, it provides the advertiser with better buying decision opportunities, instead of the traditional waterfall method. The name ‘header bidding’ originates from the placement of the auction code (wrapper), which makes simultaneous bidding possible, in the web page header section of the HTML code.
  5. 5DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Ad networks and publishers have been dealing with the all-too-familiar inner workings of managing ad waterfalls for years. However, the waterfall model comes with its own set of problems and is hardly the most efficient model anymore. But let’s go to the basics first and remind ourselves how this model works. Traditional waterfall is a bidding model where the ad request cascades down from one ad network to the next in sequential order until one can fill the request. BEFORE IN-APP BIDDING: THE TRADITIONAL WATERFALL This text was contributed by SDK DEMAND PARTNER 1 $3 eCPM No Bid $2 eCPM $2 Bid DEMAND PARTNER 2 Ad request $1 eCPM DEMAND PARTNER 3 $3 Bid MISSED OPPORTUNITY
  6. 6DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Inaccurate historical performance data In a traditional waterfall, the ad networks’ positioning is formed based on their historical eCPM performance. The inaccurate data coming out if this made the subsequent bidding less efficient, resulting in overlooked ad networks eager to pay more and publishers left with predictable outcomes and lower revenues. Higher value ads held back That particular factor encouraged capable ad networks to switch to programmatic where in-app bidding is conducted in real-time. Additionally, when all ad networks are able to bid simultaneously, there is virtually no chance to overlook the highest bids. Lack of transparency Lack of transparency plagued the mobile ad industry for years and the waterfall model contributed to it. With the introduction of first-price auction in-app bidding, it became more apparent that auction participants received equal opportunities to offer their bids and to be seen by publishers. Ad latency Ad latency issues are linked to how an ad request system is set up within the waterfall—the more requests required before it gets filled means the longer the latency. With real-time bidding on the server-side, this issue is mitigated significantly. Several major flaws contributed to the need to replace the waterfall model with a hybrid model or to fully transition to programmatic buying: 1 2 3 4 This text was contributed by
  7. 7DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Since then, three major header bidding players have come to dominate digital ad- vertising auctions for desktop.AdExchanger compared these three thoroughly; Prebid, TAM (Amazon Publisher Services’ Transpar- ent Ad Marketplace) and Google’s Open Bidding - revealing some essential facts and numbers. Prebid first launched in 2015, with TAM and Open Bidding following in 2016. Today they are still market leaders for header bidding on desktop. CafeMedia/AdThrive CSO Paul Bannister uncovered some addition- al crucial specs with his overview on the three providers in his tweet on the Header Bidding Wrapper Overview. Market share between Open Bidding, Prebid and TAM. THE LARGEST PLAYERS IN HEADER BIDDING Prebid: 51.6% Open Bidding: 32.9% TAM: 15.5% : 2%Per According to the Roxot report with data collected in Q1 and Q2 2019, Prebid has the largest market share out of the three header bidding players.
  8. 8DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Inspired by the aforementioned AdExchanger article comparing the major header bidding players, along with Paul Bannister’s tweet, our team at PubNative analyzed the three header bidders, but this time from a mobile in-app perspective. Prebid is a transparent, open-source solution initiated by AdTech pioneers in order to address the challenges faced when implementing header bidding. It originated with the idea of helping publishers to integrate header bidding, improving the Prebid products through collaboration. The open-source code makes it possible for publishers to run unbiased auctions and to set them up properly. At the same time, the whole industry benefits from both the open project as well as decreasing the barriers of entry to header bidding technology resulting, amongst others, in higher competition and bid density in the auctions. However, one of the challenges Prebid faces today is not being primarily a mobile-first solution. This is where mobile-first ad networks come in with their custom-made in-app bidding products. WHAT IS PREBID? Name of the in-app bidding solution Which formats are supported? How many partners are available? % of our publishers using the solution (PubNative data) How easy it is to add new partners? Prebid • Native • Video • Display • Interstitial 50+ major SSPs and exchanges 3% • Very easy (no update in native code needed) • Custom adapters supported Open bidding (by Google, prev. Exchange bidding) • Display • Video 20+ SSPs 6.50% • Medium / difficult (need to add yield group) • Limited number of partners Amazon Publisher Services’ Transparent Ad Marketplace (TAM) • Display • Video 20+ SSPs 9.50% • Easy • Limited number of partners (can turn bidders off and on in real time)
  10. 10DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE As mobile advertising continues its transition to programmatic, several solutions started to evolve to cover the growing need of flattening the waterfall, with a name suitable for the mobile approach – In-App Bidding. As in the desktop world, real-time parallel bidding helps boost publishers’ ad revenue by maximizing auction results and increasing efficiency. It also reduces latency, which is a crucial factor for mobile users. At the same time it eases operational overhead since monetization managers no longer need to manage as many line items and network placements in their mediation. The positive results can be seen in various case studies, such as this one by Facebook, where Rovio moved 92% of their ad revenue to run on bidding. After implementing in-app bidding Rovio could devote operational resourc- es to other areas, instead of maintaining the manually operated waterfall, and at the same time ensure higher revenues. In another case study, Melsoft could spend more time on user acquisition after switching from waterfall to bidding, which in turn helped them to raise their ad monetization opportunities and grow their business. Furthermore, FUN-GI reported that after implementing bidding and relying less on the manual waterfall, the studio could use their time more for developing new games and expanding their team. WHEN “HEADER” BIDDING CAME TO MOBILE Boosting publishers’ ad revenue Maximizing auction results Increasing efficiency
  11. 11DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE The Hybrid Setup The hybrid model is a fusion between the traditional waterfall and in-app bidding technology. These complement each other by initiating the open bidding auctions in the first step, and in the second step by going through the waterfall, to finally let the highest bidder win the whole auction and the creative be served within the publisher’s ad placement. The process of in-app bidding begins with an ad request being sent to the server and a real-time auction then takes place be- tween the bidding demand sources. In contrast to the tradition- al (sequential) waterfall, in a parallel bidding auction every ad network gets to compete at the same time, with the highest bid winning. This way, all bids are considered and you don’t risk missing out on a potentially higher bid and hence more revenue. The winning bid is finally served in the publisher’s ad space. The auction takes place server-side and can be combined with a client-side waterfall, with that setup being called a hybrid auction. HOW IN-APP BIDDING WORKS Publisher’s Ad server PubNative Super Auction MoPub $6 Bid Ad Network1 $5 Bid AD SERVER SIDE CLIENT SIDE No Bid DEMAND PARTNER 3 DEMAND PARTNER 1 $6 Bid EXCHANGE 1 $5 Bid Exchange 1 Auction DSP A: $5 Bid DSP B: $4 Bid DSP C: $3 Bid $7 Bid DEMAND PARTNER 2 Hybid SDK $7 Bid Maximum Bid Winning Bid
  12. 12DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Ad network name In-app bidding product name Supported ad formats Bidding ad sources Hybrid/server side/client side auctions AerServ/InMobi OpenAuction • Banner • Native • Rewarded Video • Interstitials No info available Server-side Amazon TAM • Display • Video 20+ Server-side AOL/Verizon Smart Yield • Banner • Native • Rewarded Video • Interstitials No info available Hybrid AppLovin MAX • Banner • Rewarded Video • Interstitials 3 No info available Appodeal BidMachine All major ad formats 14+ Hybrid Chartboost Helium • Banner • Rewarded Video • Interstitials 4 No info available Fyber FairBid • Rewarded Video • Interstitials 5 No info available Google Open Bidding • Display • Video 20+ Server side IronSource LevelPlay • Rewarded Video • Interstitials 4 No info available In-app bidding spend grew 20% quarter on quarter in Q3 2019, according to PubMatic’s report. Of those who already have in-app bidding or plan to implement it in the future, 56% say it leads to greater transparency into bid value, better yield management and higher revenue. According to InMobi’s report, in 2019 38% of app publishers use in-app bidding, which is up from 31% the year before. However, the number is constantly rising as new in-app bidding solutions have been launched by some major AdTech companies in the last couple of months. Together with PubNative’s HyBid, we have gathered some of them together. To the right you can find a more detailed overview. THE IN-APP BIDDING MARKET
  13. 13DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Ad network name In-app bidding product name Supported ad formats Bidding ad sources Hybrid/server side/client side auctions Mintegral HiBid • Banner • Native • Rewarded Video • Interstitials 2 Hybrid MoPub Advanced Bidding • Banner • Native • Rewarded Video • Interstitials 6 No info available OpenX OpenX Bidder • Banner • Interstitials No info available No info available Prebid Prebid Mobile • Banner • Native • Rewarded Video • Interstitials Many major SSPs and exchanges Hybrid PubMatic OpenBid • Display • Native • Video 8 Server-side PubNative HyBid • Banner • Video • Interstitials 10+ Hybrid Tapjoy/Tapdaq Header Bidding • Rewarded Video • Interstitials 9 Hybrid Timehop Nimbus • Banner • Native • Video • Interstitials 10 Hybrid Products Most in-app bidding products have their own names, like Helium by Chartboost or MAX by AppLovin. With strong mobile growth in APAC, Mintegral released parallel bidding last year, being the first Chinese AdTech company to enter this space. Bidding ad sources The in-app bidding solutions on the table are new on the market and most of them are not finished products, but are rather being further developed as more bidding ad networks are added. For instance, LevelPlay by IronSource has only four partners integrated in the unified auction. Advanced Bidding by MoPub has six, FairBid by Fyber has five and Tapjoy has nine. However, they are all announcing that they are implementing more bidding ad sources soon and it is left to be seen how fast the progress will be. 1 2
  14. 14DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Formats When it comes to ad formats, display ads are the most common format traded within in-app bidding auctions, but rewarded video has been getting particular focus recently from the major mobile ad networks as they move into this space. The gap between different ad units is driven by the different types of advertisers (games or brands) and publishers (apps or games) who use different monetization stacks (programmatic vs ad networks). Facebook Audience Network Additionally, one of the participants that has always been at the forefront of in-app bidding advancement is Facebook. Although they are not positioned as service or technology providers, they are heavily involved through their Audience Network Partner Program, which allows publishers to include ads from Facebook’s network in the auctions. By using the Audience Network SDK to render the ads, publishers are able to monetize through Facebook’s integrated bidding partners. Prebid Mobile Last but not least, Prebid Mobile - though a late entrant to the market - has been continuously advancing in the last year and is committed to grow even further in 2020. As members of the Prebid Mobile committee, PubNative believes that it is essential to coin this initiative for an open and community-driven ecosystem. Read more about PubNative’s contribution to Prebid Mobile here. 3 4 5
  16. 16DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE The transition from waterfall-based logic to full open bidding auctions is not going to occur overnight. As the whole AdTech ecosystem is moving into the parallel bidding era, so far most networks only have three or four partners participating in in-app bidding, like Chartboost’s Helium for instance, who has four or AppLovin’s MAX who has three. In the current state of development, the ad space in the publisher’s app first goes through the open auction, with the participating ad networks. However, since only a few networks are integrated into the open auction, the ad opportunity is not maximized. In order to bridge any revenue gap, the unfilled ad space is then sent through the waterfall setup, which has considerably more participating ad networks and hence increases the chances of returning an ad. One other point to add is that most of the in-app bidding solutions focus on particular formats, which means TRANSITION PERIOD publishers do need to choose from the available solutions (bidding or waterfall) to maximize their yield. This status quo means that most solutions are not yet purely in-app bidding technologies but compensate with the waterfall component. As more partners are being added to open auctions, in-app bidding platforms will deliver more fill and increased revenues. For now and as long as parallel bidding products are still being developed, the process will remain a fusion between in-app bidding and waterfall. Waterfall PAST FUTURE PRESENT In-App Bidding Hybrid
  17. 17DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE Mobile header bidding, or in-app bidding, is on it’s way to becoming standard practice. However, the newly released products are still being further developed and the market for in-app bidding continues to unfold. According to PubMatic, there is considerable room for in-app advertising spend to grow in 2020. Reports and case studies on in-app header bidding show a 30% growth and some even report up to 45% increase in publishers’ARPDAU after switching to parallel bidding. We can expect to see shifts in terms of market share between the existing players as their products evolve. With a still maturing landscape, some solutions may focus on adding value through different formats (playables, rewarded video), or geos (US, LATAM, EU, APAC), driven by type of advertisers and publishers. In-app bidding will disrupt the current state of the digital advertising market as its usage accelerates. It’s a disruptive change that will rebalance the value distribution, making the ecosystem more transparent and increasingly competitive. The unified auction helps publishers to maximize their ad revenues through a more transparent, fair and open competition. As the market becomes more saturated for most publishers, especially in the mobile games sector, it becomes crucial to extract as much as possible from each advertising dollar. In the long term and as the technology advances, in-app bidding would additionally lead to cutting out the middlemen within the digital advertising landscape. In the short term, we can expect increased CPM and fill rates for publishers, lower margins for intermediaries and more transparency for buyers - overall already on a good way to a more democratized mobile AdTech ecosystem, from which everybody profits proportionally to the value they bring. THE FUTURE OF IN-APP BIDDING Waterfall Revenue Hybrid Revenue In-App Bidding Revenue
  18. 18DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE INDUSTRY QUOTES FROM PARTNERS “The role of a bidding in-app environment is crucial for any developer to maximize their revenue opportunity. To me, waterfall solutions are very legacy which typically sees a lot of money left on the table. I’ve spoken to other peer publishers who claim that they’re experts in optimizing, prioritizing the hierarchy and adjusting CPM based on historical trends. However, all the modifications and improvements are always reactive instead of proactive meaning, you’ve already lost revenue in order to understand a change is required to be made. With bidding, each demand partner has an equal shot of buying that inventory and you can rest easy knowing you’re always getting the highest price for any given opportunity. If you’re doing it right, you’ll diversify your demand, increase eCPM, fill % and most importantly, increase your bottom line.“ David Leviev, VP Programmatic Product Development at Timehop “At Chartboost, we strongly believe in the positive impact of unified auctions on the mobile app monetization landscape. In-app bidding brings transparency and fairness to the advertising industry, values that are very much needed today. And most importantly, it helps mobile app publishers make more money by auctioning out programmatically their inventory across competitive advertising partners, removing the overhead of manual settings”. Pepe Agell, Co-CEO and CSO at Chartboost
  19. 19DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE ON IN-APP BIDDING - BY PUBLISHER CODA We have implemented in-app bidding at Coda during the first month of our first game’s launch: Rope Rescue. Our small team wanted to focus on the things that mattered for the developers instead of the cumbersome work of optimising waterfalls. It’s been a year since then. We’re still just at the beginning of a long journey. Here are some challenges that we have faced (and are overcoming with the help of our partners steadily). We want the machines to do the hard work and create the fair market that we yearn to have in mobile advertising (read more about machine learning here.) It’s a big shift from how things have been and the setbacks should not shake our trust in the technologies we build together but only grow our vigilance on persisting to get incremental and continuous improvements. In-App bidding is an inevitable direction the market’s taking. We all have a responsibility to make it work for the industry. 1 2 3 4 5 6 “The Hybrid” Setup: When waterfall and in-app bidding work hand in hand, it’s not quite clear nor easy to understand the dynamics even for the most seasoned monetisation experts. Lack of absolute clarity makes it difficult to keep being engaged in the integration process. It’s Still not Plug & Play: Integration requires some important changes on the client-side and beta testing takes some time for the teams to have confident enough data. Furthermore, the bidders didn’t seem to be working as expected in the beginning, shaking our trust on a product that is very promising and is highly anticipated. Initially 2 of the 3 partners we worked with underperformed considering the ARPDAU. Waterfall Still Works Well: Strong partners kept maintaining and strengthening their waterfall-based products. Those platforms are still performing really well to this day, specifically in our industry. The fill rates are acceptable. Waterfall building and sustaining tools keep improving. There hasn’t seemed to be much of an incentive to use in-app bidding. In-app bidding offers less transparency and control over impression values (eCPM). The ad networks are not shar- ing the auction-based data in a comparable detail as for the waterfall placements. In-app bidding uses the whole spectrum of the real-time bidding freedom against the waterfall, as it should do. However, as a smarter and more flexible real-time system, it beats the classical waterfall not at its best but where the waterfall is weaker. The publisher has quite little control to maximise the yield. Not enough competition: Companies took sides and didn’t let the others use their bidders. It seems like none of the products in the market includes enough partners to incentivize this change. This text was contributed by
  20. 20DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE HOW IN-APP BIDDING AFFECTS THE DEMAND SIDE - BY KAYZEN For ad buyers, in-app header bidding can overall be considered as a positive development. However, the view differs depending on which tech stack and partners buyers funnel their ad spend through. Below are a few considerations and elaborations around how in-app header bidding affects buyers and what it means for the market as a whole. Real-time pricing impression level vs historical CPMs bulk based pricing Ad networks’ tech stack is not built to price each impression with an accurate value. Instead, an ad network ranks campaigns in a certain order of delivery based on historical performance. Think about this as a waterfall within the ad network’s delivery engine (not to be confused with the publisher waterfall). In contrast, RTB buyers price each single impression with a specific value. In the currently still predominant setup of publisher waterfalls, the ad network can “cherry pick” the better impressions if it has a high position on the waterfall. This leads to higher eCPMs which will mean the publisher will keep positioning the ad network on the higher waterfall position and RTB buyers may just get a look at the impression, after an ad network has already decided not to bid. You can see already how this creates a market bias and sub optimal monetization for publishers. With in-app header bidding, everyone gets “equal access” to inventory, and hence RTB buyers can outprice ad networks for high value impressions, since their systems are better built to understand the true value of a single impression and respond with a bid in real time. 1st Price auctions Today, already about 27% of auctions sent to Kayzen by the 25 exchanges the bidder is connected to are transacted on 1st price. With the transition to in-app header bidding, more and more inventory gets transacted on 1st price auctions. While in-app header bidding does not necessarily require an auction to be on 1st price, it currently looks like gradually most sizable exchanges will transition to 1st price auctions over the next 12 months. This will impact RTB buyers, who are used mostly to transact on 2nd price auctions as of today and they will have to adjust their buying algorithms to account for the auction type. This text was contributed by If you are interested to learn more about how 1st price auctions will affect buyers, read this article.
  21. 21DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE The role of walled gardens Today, many publishers have walled gardens monetization SDKs on top of their waterfall. This means walled gardens can “cherry pick” impressions on a first look and deliver higher CPMs thereby maintaining their high position on the publisher waterfall. You can see how this leads to a virtuous circle, where having a high position on the waterfall will likely lead to maintaining a high position in the future. Hence, it will be interesting to observe if the market share of walled gardens will decline with the further adoption of in-app header bidding. This could be one of the reasons, why in particular google is trying to avoid the market moving there. Flattening the playing field Overall, a higher adoption of in-app header bidding should lead to reduced market bias, increased competition and a more liquid and efficient ecosystem overall. Economic theory teaches us that the more efficient a market is, the lower the margins tend to be and the less money “middle men” make. This is probably the biggest positive news for buyers (and sellers alike). In-app header bidding will help to flatten the playing field and allow buyers to get more of their money go to working media instead of middle men. Afterthought: Apple’s iOS announcement and the role of IDFA One thing to watch will be how the future of the IDFA, and unique identifiers in general, will affect the transition to in-app header bidding. One of the key motivations for publishers to move to in-app header bidding is to enable more competition for premium impressions. The data we see at Kayzen tell us that the value a buyer ends up bidding on the same placement can vary as much as by a factor of 100x depending on the specific user device ID. Hence, two impressions who seem to look alike might have a very different value depending on the buyers’ information about that user. If buyers are not able to identify highest value users anymore (because of the lack of unique identifiers), then the volatility bids may become smaller, which might lead to less premium paid for specific impressions. This may lead to a lower than expected increase in ARPDAU for publishers when they move from a static waterfall to in-app header bidding. This text was contributed by
  22. 22DECONSTRUCTING THE IN-APP BIDDING LANDSCAPE IN-APP BIDDING FROM A BRAND/LOCATION- CONTEXT PERSPECTIVE - BY VERVE GROUP From a Fortune 500 brand perspective, in-app bidding gives the opportunity to always find the right audience across all supply sources. When the audience data is paired with a unified auction, it can empower significantly better bidding strategies, securing the best impressions needed to reach advertisers KPIs - be it viewability, CTR or other engagement metrics. With the unified auction, we get access to unique inventory pockets otherwise hidden somewhere in the waterfall. It also reduces the duplicated inventory and auctions and helps optimize our supply paths. With transparent and open auctions, in-app bidding democratizes access to supply and at the same time maximizing access to most premium bids/demand. Pairing advertisers’ needs and KPIs with our location-context audiences, allows us to fastly become a top demand partner for most publishers we connect via in-app bidding - most frequently via Amazon TAM, but also via PubNative’s HyBid solution. When we have a brand with a new campaign offering high CPMs rates, in-app bidding makes it possible for publishers to take advantage of that offer immediately. With the waterfall setup on the other hand, we would have had to negotiate premium positions with the publishers and have them adjust their waterfall - this manual process being costly and inefficient (in terms of opportunity cost) on both ends. This text was contributed by
  23. About PubNative PubNative, now part of Verve Group, is a mobile publisher platform and programmatic ad exchange, providing advanced monetization solutions for mobile app developers. With its proprietary cross-format optimization technology and mobile in-app bidding solution, PubNative enables mobile publishers to maximize their programmatic advertising revenue via flexible integrations (API, SDK, JavaScript). The company is headquartered in Berlin with satellite offices in Beijing and Seoul. About This White Paper This white paper is based on internal data and research by PubNative as well as data from external resources. All the charts and tables are made by PubNative, based on the results from our research. The section on “Before header bidding: the traditional waterfall” on pages 4 and 5 were exclusively written by BidMachine for this white paper. Section “On in-app bidding - by publisher Coda” was exclusively written by the publisher platform Coda. Section “How in-app bidding affects the demand side - by Kayzen” was exclusively written by the DSP Kayzen. The section on “In-app bidding from a brand/location- context perspective” was written by the data-first brand performance ad platform Verve Group. Quote-contributors are Chartboost and Timehop. Contact Us Email: Web: Address: Greifswalder Str. 212. 10405 Berlin, Germany