What is an advertising waterfall?

A waterfall refers to the traditional programmatic method of ad buying. The waterfall organizes ad sources in a way that is meant to yield the highest CPMs for advertisers and increase revenue for publishers.

How does an advertising waterfall work?

In the waterfall, publishers’ ad servers will prioritize the ad networks they work with on any given transaction based on the rates offered for that impression. Essentially, an advertiser will first try to sell inventory directly, then if unable to do so, will pass the impression to premium ad networks and so on. Inventory will fall down the waterfall until it ultimately gets sold to the publisher. This differs from in-app bidding, which allows publishers to offer their inventory in auctions that take place outside of the waterfall, creating an unbiased auction where all buyers bid on the same inventory simultaneously.

Waterfall order depends on the ad network’s priority. If the demand partner ranks higher thanks to its average historical yield, it’s granted a higher priority over other ad networks. And since the impressions inventory is offered sequentially, if a higher priority network meets the minimum bid, even when the next buyer pays double for that impression, it goes to the first buyer in a sequence that meets the price. 

Waterfall Model Advantages and Disadvantages

Advantages:

✔︎The waterfall model allows publishers to sell off their remnant ad inventory. 

✔︎The waterfalling solution has an easy set-up as it only requires pasting passback tags from one SSP (or ad network) to another.

✔︎Standard ad tag (easily possible for in-app advertising).

✔︎Low competition (for first-line advertisers)

✔︎Higher revenue opportunities.

Disadvantages

✘Demand partners are prioritized based on their historical yield.

✘Sequencing may cause delays in page-load speed.

✘Unsold impressions cause lower fill rates.

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