What Is Waterfalling and How Does It Work: Everything You Need to Know
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Everything You Need to Know About Waterfalling

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Multiple advances have been made in ad tech during the past decade, and with a good reason. Thanks to rising internet penetration rates and increasing popularity of digital platforms around the world, digital advertising has become one of the most important forms of advertising. In fact, almost $356 billion were spent on digital advertising last year. But this success wouldn’t have been possible had the industry not gone through various changes.

Unlike a decade ago, publishers and advertisers now have a variety of options at their disposal to sell and buy ads on the internet. The most popular method is definitely header bidding where publishers offer their inventory to multiple ad exchanges simultaneously. This increases ad revenue for publishers and gives access to premium inventory to advertisers. Just by leveraging this or other video ad solutions, companies can achieve their business goals!

But long before header bidding entered the online advertising scene, there was some other technique buyers and sellers relied on. It is used to this day, but to a lesser extent due to advances in advertising technology, as we mentioned at the beginning. That technique is known as waterfalling.

In this article, we will delve deeper into this advertising method. While we are at it, we’ll also go over some upsides and downsides of it. This will help you determine whether or not you should try something other than header bidding while buying or selling ad space!

Let’s start!

What Is Waterfalling?

In the video advertising world, the term “waterfall” describes a traditional technique that enables publishers to make as much money as possible out of their 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. Yes, they all refer to the same thing!

But, what is waterfalling?

So, waterfalling is a process during which 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 impressionis sent to the next ad network until publishers’ remaining inventory is cleared out.

In case you don’t know, a 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.

Advantages of Waterfalling

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.

Disadvantages of Waterfalling

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 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 CPM. 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 for 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 load, errors will occur. Namely, the user won’t see the ad or it will become timed out. This could lead to revenue loss.

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 waterfalling. As you can see, we wanted to mention both advantages and disadvantages to help you get a better picture of this technique.

If you want to monetize your video content and maximize your ad revenue, then it’s time you leverage Brid.TV’s advanced technology! We can help you monetize your content with all known ad formats. And we can set up header bidding for you as well! This enables you to offer your inventory to multiple ad exchanges simultaneously, leading you to achieve a better ROI!

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