Will AdSense ever outperform AdX and Header Bidding?
Publishers considering whether they should upgrade from AdSense to Header Bidding with Ad Exchange will rightly want to know whether they will earn more by doing so. Combining Header Bidding with Ad Exchange (and maybe even Open Bidding too) is the optimal set-up in most situations, but that doesn’t mean that it is always a better choice than AdSense.
Knowing which solution is likely to be best for you is key to getting the most from our ad inventory. This guide will help you understand the differences and how to pick the solution best suited for you.
What are the two solutions?
Most web publishers will already be familiar with AdSense. AdSense is Google’s flagship monetisation solution. It’s designed as an easy entry solution for publishers looking to get into advertising. It’s the biggest ad delivery network in the world and needs little introduction.
An Ad Exchange + Header Bidding set-up is more complex and consists of a few parts. Ad Exchange is the “big brother” to AdSense – aimed at more advanced publishers looking to achieve more through better controls. Header Bidding is a way to have other partners compete against Google demand with the aim of pushing up the winning bid. Taking the step further you can also introduce Open Bidding, to bring even more partners into the auction.
On paper, the more advanced solution always earns more. Worst case scenario is that you get paid what Google would bid anyway, but you have a significant chance of earning more on each impression.
As with most things in online advertising, things are more complex in practice. In particular, AdSense can outperform Ad Exchange + Header Bidding when Click-Through Rates are high. Understanding what drives that and when it can happen is key to choosing the right solution for you.
Before looking at the exception though, it is worth considering why the combination of Ad Exchange and Header Bidding usually outperforms AdSense.
AdSense vs AdX & Header Bidding – Why AdSense (usually) earns less
There are more factors that influence this than can be covered in a short recap paragraph, so I’ll focus on three that have the biggest impact: Demand, CPMs and Auction Pressure.
Demand: Technologies like Header Bidding give more advertisers the chance to bid on each impression. That increases the chance of that impression being a match for what a given advertiser is looking for and willing to pay more for.
CPMs: AdSense pay for clicks. Ad Exchange and SSPs plugged into your Header Bidding pay per impression, on a CPM basis. This allows you to monetize every ad that is shown rather than just the ones that are clicked on.
Auction Pressure: Because Header Bidding is its own auction, advertisers have to bid more than one another to win the impression. Having more SSPs in the mix allows the rules of supply and demand to push up the price you get for each impression.
That is quite a “broad strokes summary”, but you get the idea: More advertisers competing for impressions in a fair auction helps you earn the true value of your inventory.
How AdSense can sometimes beat Ad Exchange
Given that the alternative is a more transparent auction with more bidders, it can be surprising to see AdSense sometimes perform better. In fact, sometimes it can perform much better than a more advanced set-up. It’s rare, but we have seen instances where AdSense can beat other set-ups by 20-30x.
The key to understanding why is the way each auction is priced. Header Bidding and Ad Exchange both run a CPM auction, where the highest bid per impression wins. AdSense, however, is CPC based, with the winner being determined by the bid submitted for that click and the likelihood of the winning creative actually being clicked on.
This means that AdSense is natively optimised to produce clicks. This isn’t great when publishers want to generate income from an audience that isn’t leaving the site in droves. However, it’s a powerful approach when applied to high CTR positions.
In extreme situations, this set-up seems to create a sort of feedback loop. Two or more advertisers with aggressive, high CTR ads bidding against one another for clicks from a high CTR placement can send effective CPMs rocketing. If the publisher is lucky enough that this situation doesn’t create invalid traffic (IVT) issues and deductions, the revenue can go sky-high.
When should I use AdSense over Header Bidding?
The correct answer always is “test both”. Whilst there are patterns and rules of thumb, no one knows how any solution will perform for any piece of inventory until it is tested. If pushed for a rule of thumb then 1% CTR seems to be about the level where AdSense starts making it difficult for CPM based solutions to compete. If you are getting a 1% CTR across your inventory and doing that consistently without deductions of IVT measures, like the two-click penalties or limited ad serving, then AdSense might be the best choice for that inventory.