A Lore of Bids

Often people find advertisements annoying if it’s not pleasing enough. But subconsciously, we all prefer suggestions, right?

We need someone to second us on what to buy, where to buy, how to buy etc. And of course, people like offers on products that they knowingly or unknowingly see on websites or other channels.

We usually click on ads to see what is there for us. We also do watch some promotional videos, then decide whether the product shown is what we need, want, or desire.

The two primary entities involved in the process are -

Advertiser or Buyer, the one who wants to sell a product and increase their reach in the market.

Publisher or Seller, who wants to monetize their website/app, allow these advertisers to display their content on designated ad slots.

Now, there has to be a place or system where ad trading can happen. Here comes, AdTech - something you might have heard in the Digital Marketing industry.

Generally speaking, AdTech is all about displaying ads on websites, Mobile Apps, or similar other platforms, and find best ways to provide monetary benefit to both parties. However, the channels of ads can be modified depending on the marketing needs of a brand.

If you are not already familiar with these terms… Buckle up. You are in for a ride!

After AdTech, you must have heard the term “RTB” thrown around a lot. RTB is an acronym for Real-Time Bidding. And, OpenRTB is a consortium that provides industry standards and creates a common language for clear cut communication between Advertisers and Publishers.


Coming to functionalities - as a website is loads, the slots are open for auction and waits till some Advertiser fill it with ad.

Once a DSP, or Demand Partner, receives the Bid Request, an internal shortlisting happens within the DSP. A relevant ad, with the highest bid is shortlisted. The creative, including the bid price, is then sent for auction to the exchange.

Read More


The bid of the shortlisted ad gets scrutinized, based on the floor price set by the Publisher or Publisher’s system/SSP. The floor price is the minimum price at which the slot will be sold to the bidders.

Generally, there are two kinds of floor involved here -

Hard Floor

The price is generally the highest, below which any bid will not be accepted by the publisher and will be discarded.

Soft Floor

A soft price floor considers the bids that are slightly above the hard floor.

For example, let’s say a publisher asks for a price bracket of $4.25 to $4.75. That means, Soft Floor will be $4.75 and Hard Floor will be $4.25. Hence Bidder D with price of $4.60 is the winner.

Image Courtesy: https://clearcode.cc/blog/first-price-second-price-auction/

Talking about auction or Real-Time Bidding, it is a significant part of ad trading. On the exchange’s side, the various kinds of auctions performed are -

First Price Auction

Advertiser with the highest bid wins the slot and pays precisely what they bid.

Second Price Auction

Of all the bids received by the exchange, the highest bidder wins the auction, but the price that they will pay is the amount of the second highest bidder’s bid plus $0.01.

Image Courtesy: https://www.verizonmedia.com/insights/auction-mechanics-101

Here, Advertiser B wins, but pays $0.01 in addition to what Advertiser A is bidding.

We all know it is a standard practice that a tag is placed on the page and loads along with loading of the page. Since the general flow of an Ad Request is, when a tag is fired from a page, the SSP fans it out to Ad Networks/DSPs/Exchanges. Here, various kinds of issues may arise, like latency that causes an increase in page load time. Therefore, the chances are high that a user might leave the page, before the ad loads, if page load time is high !

To overcome this problem, there exists another concept of bidding, that happens from the head section of the publisher’s webpage. The ad slots, defined on the page, are also defined in the head tag along with some accompanying scripts. That script fires Ad Requests to Bidders to fill the slot.

This is known as Header Bidding. Latency will be negligible in this scenario because we will have the details to fill the slots before the page loads. Also, this method of bidding lets multiple demand sources to bid on the same publisher Ad Slot at the same time.

Through this, publishers can increase their yield and make more money.

PreBid.Org, which provides the Header Bidding script, is an open-source community that lets anyone review and edit the code based on their needs.

Typically, Publishers use Google Ad Manager (previously DFP) to manage Ads on their Website. Ad Manager either follows a waterfall or a price priority-based model in which the highest bidder wins the slot. So, to give other advertisers a chance to take part in the bidding process, publishers use the Prebid's Script/Tag on the page.

This is how Header Bidding works -

Image Courtesy: How Does Header Bidding Fit into your Overall Ad Ops Strategy?

The JavaScript from Prebid follows the process as below -

  • The ad server’s tag is paused by a timer while the Prebid script fans out the Bid Requests to all participating or selected Bidders.
  • Creatives and bids are returned from the DSPs or Ad Exchanges within a stipulated time.
  • From the bid responses, Prebid.js finds a winner (if applicable) and caches the creatives.
  • Prebid passes the winning bid parameters to the ad server as key-values.
  • The ad server takes those key-values and finds a matching line item and compares it to other line items that bid on this impression.
  • If the ad server determines Prebid wins the auction, it returns a signal to Prebid.js, which then sends a creative to the page.

Now let us consider a closed group bidding scenario, for which the industry adopted term is Private Market Place or PMP (Read More).

In this, there is one seller, connected to one or many selected buyers, and then a closed auction is conducted between them.

Currently, there are three types of PMP deals in the industry -

Programmatic Direct Buy

There are one buyer and one seller. The type of bidding that comes into play here is fixed price auction. Advertiser will pay a pre-negotiated price.

Preferred Deal

There is a one-to-many relationship between the publisher and advertisers. In this case, publishers give away their inventory to selected advertisers. The bidding type that comes into play in this scenario is the First price auction from the pool of pre-selected advertisers. The one with the highest bid wins.

Private Auction

This is an arrangement between a publisher and one or more demand partners, as an open auction. In this type, too, there is a one-to-many relationship between the publisher and advertisers. But rather than a fixed price, the second-price auction is what comes into play here. The publisher has the authority to specify the demand partners who will bid for their inventory.














Post Written By:
Suraj N.A.
Full Stack Developer
Kritter Software Technology Pvt. Ltd

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