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Waterfalling: Everything Businesses Should Know in 2020


Nowadays, many companies are looking to achieve their business goals by using different video ad solutions. Unlike a decade ago, they now have a variety of options at their disposal. The most popular one is definitely video header bidding where publishers offer their inventory to multiple ad exchanges simultaneously. But we shouldn’t forget about its predecessor, regardless of whether you’re a fan of it or not. Yes, we’re talking about the waterfalling method.

In this article, we’ll focus on this method in case you’re not familiar with it. However, if you are, we still invite you to stick around as we’ll also go over the upsides and downsides of waterfalling. This might be useful if you’re still unsure waterfalling is your thing. So, here’s what we’ll cover:

Let’s start!

What Is Waterfalling?

In the video advertising world, the term “waterfall” describes a traditional publisher technique for making as much money as possible out of available ad inventory. Don’t worry if the term looks unfamiliar to you. You might be using other names for this technique such as fallback and daisy-chaining.

So, waterfalling is a process where publishers sell all remnant ad inventory. It occurs when a publisher is unable to sell premium ad slots that are typically reserved for direct ad sales between the publisher’s internal sales team and advertisers. If you’re wondering about the name, it’s rather fitting. Specifically, waterfalling resembles a waterfall in that it calls one demand source at a time, one after another.

During this technique, advertisers buy ad impressions they want. Any remaining impression is sent to the next ad network until publishers’ remaining inventory is cleared out.

In case you don’t know, the publisher tries to sell their inventory through direct sales because these usually have the highest cost per mille (CPM). However, if this method isn’t successful, the publisher will resort to passing the impression down the waterfall to numerous ad networks until someone purchases it.

One of the benefits of this daisy chain technique is that the publisher can sell all inventory. But, if you’re new to the industry, you need to keep one thing in mind here. As your impression moves further down the waterfall, expect that the CPM price will decrease. Seems like we can’t have it all with the waterfalling model!

How Does Waterfalling Work?

As we’ve previously mentioned, publishers use waterfalling in an effort to earn money for the unsold inventory. At first, they work with those ad networks that offer the highest rates. However, if some inventory still remains, they’ll also work with the networks that offer lower rates. The process stops when publishers monetize every last impression.

Traditionally, publishers used the waterfalling method with ad networks only. However, this has recently changed. Namely, they now rely on supply-side platforms (SSPs). So, they start by selling impressions through one SSP at a high price floor. If no one picks these impressions up, publishers send them to the second and sometimes third SSP at lower price floors. 

Now that we know how waterfalling works, let’s examine its advantages.

The Advantages of This Technique

Let’s be real. The reason why waterfalling is so appealing is that it helps you sell inventory which would otherwise be left unused. So, if you ask us, we see two big advantages of this technique.

Firstly, waterfalling is mainly focused on fill rates. In other words, you can use this technique to maximize the fill rate. Of course, you’ll maximize revenue as well. However, don’t forget that, if you enable waterfalling, you’ll use various ad servers that will waterfall between one another.

Secondly, some marketers say that waterfalling is way easier to implement than header bidding. In fact, it does require less technical knowledge than the other method. To implement waterfalling, all you need to do is set up an ad tag and you’ll be good to go.

Like with most things, where there are advantages, there are also disadvantages. Let’s see what they are for waterfalling.

The Disadvantages of This Technique

There are a number of things you need to bear in mind here. We’ll mention them below so you can form your own opinion on daisy chaining.

The first downside of this technique is low yield. So, the publisher’s ad server selects the demand partners based on the highest average ad yield. The server doesn’t choose them based on the current market price. This means that the given price is the average and not true CMP. One solution here is to rely on historic averages. However, you still won’t be sure what the final price might end up being.

Another thing to watch out is latency. When implementing the ad tag waterfall, bear in mind that it could take some time before an ad is displayed. Usually, it takes a couple of seconds for every ad tag attempt. You need to take this into account when you’re deciding how long your ad tag list should be.

Lastly, we want to mention errors and timeouts. You need to be ready for some loading with each ad network tier. In case it fails to lad, errors will occur. Namely, the user won’t see the ad or it will become timed out. This could lead to revenue loss.

Let’s now take a look 

Waterfalling vs. Header Bidding

Waterfalling might have introduced the sequential order of selling inventory, but header bidding has removed it. To put it simply, your inventory is up for sale and the demand sources compete at the same time. Then, your ad server collects all the bids it receives. The source that submits the highest bid wins.

But don’t write waterfalling off just yet. When compared to header bidding, this technique doesn’t require a lot of know-how. As we said, after setting up a tag, the process will begin. Sounds like a piece of cake, right? While it is, there’s another downfall of waterfalling compared to header bidding. Specifically, header bidding doesn’t require any ad server adjustments. On the other hand, you need to update waterfall tags constantly.

In addition, header bidding doesn’t take much time. Not only that, but it also doesn’t involve as much latency as waterfalling does. This technique also implies numerous versatile demand sources, while waterfall implies those sources you already know.

Choose Your Best Option

We hope our article has helped you gain understanding of this technique. As you can see, we wanted to mention both advantages and disadvantages to help you get a better picture of this technique. In the end, our advice is to choose the option you find to be suitable for you and your business.