Key Takeaways

• Waterfall is a sequential ad serving method where ad requests flow from one network to the next until filled

• It's simpler to implement than header bidding but typically generates less revenue

• Waterfalls give publishers more control over which demand sources get priority

• Despite header bidding's popularity, waterfall setups still have practical uses in 2024

• Modern hybrid approaches combine waterfall with header bidding for better results

So What Is an Ad Waterfall, Really?

Picture a real waterfall—water cascades down from the top, flowing to the next level when the first is full. That's basically how ad waterfalls work in digital advertising.

An ad waterfall (sometimes called a programmatic waterfall) is a method where publishers offer their ad inventory to multiple networks in a predetermined sequence. When a user visits a webpage or app with an ad slot, the publisher's ad server calls the first network in line. If that network can't fill the slot (or meet the minimum price), the request "falls" to the next network, and so on until the ad space gets filled.

It's kinda like asking your richest friend for money first, then working your way down your contact list until someone says yes.

How Waterfalls Actually Work

Let's break down the waterfall process:

1. A visitor loads your webpage or app

2. Your ad server pings the first ad network in your waterfall (usually the one with highest historically-proven CPMs)

3. If network #1 doesn't have a suitable ad or won't meet your price floor, the request moves to network #2

4. This continues down your pre-set sequence until an ad is served or you run out of networks

5. The winning ad displays to the user

The whole process takes milliseconds, but each "step" down the waterfall adds a tiny bit of latency.

When Waterfalls Make Sense (And When They Don't)

Advantages of Waterfall

Simplicity: Waterfalls are relatively easy to set up and manage, especially for smaller publishers with limited tech resources.

Control: Publishers decide the exact order of networks, giving them more direct control over which demand sources get first dibs.

Predictability: With waterfalls, you know exactly where your ads are coming from in what order, making troubleshooting easier.

As Adtelligent explains, "Waterfall gives publishers the highest degree of control over which demand sources get priority."

Disadvantages of Waterfall

Lower Revenue: Since networks bid sequentially rather than simultaneously, you might miss out on higher bids from networks further down your chain.

Inefficiency: The network at the top of your waterfall might win the impression with a $2 bid, even though a network at the bottom would have paid $5.

Latency Issues: Each step in the waterfall adds loading time, which can affect user experience.

According to Setupad, "The sequential process of waterfall provides less transparency into the bidding process, making it difficult for publishers to understand the true value of their inventory."

Waterfall vs. Header Bidding: The Big Showdown

Header bidding turned the ad tech world upside down by letting ALL demand sources bid on inventory simultaneously—basically eliminating the waterfall's "first dibs" system.

Why Some Publishers Still Use Waterfalls in 2024

Despite header bidding's advantages, waterfalls haven't disappeared. Here's why:

1. Technical barriers: Some publishers lack the technical resources to implement header bidding

2. App environments: In-app header bidding has been slower to develop than web

3. Direct deals: Publishers with strong direct relationships might prefer the control of waterfalls

4. Specific inventory types: Some ad formats work better in waterfall setups

As AppSamurai notes, "Compared to waterfall bidding, header bidding requires a more sophisticated technological setup."

Hybrid Approaches: Getting the Best of Both Worlds

Smart publishers today often use hybrid models:

• Using header bidding as a "first look" before the waterfall

• Implementing server-side header bidding to reduce latency

• Using waterfalls for certain ad formats and header bidding for others

• Creating custom solutions based on their specific traffic patterns

The Bottom Line

Waterfalls aren't dead—they're just part of an evolving ecosystem. While header bidding offers better efficiency and potentially higher revenue, waterfalls provide simplicity and control that still make sense for many publishers.

As Epom explains, "In the early days of ad tech, ads were served through a daisy-chaining process aka waterfalling, where the bid of each advertiser should meet the minimum price set by the publisher."

Understanding how waterfalls work is essential knowledge for anyone in digital advertising—whether you use them or not. They're the foundation that modern programmatic was built on, and knowing their strengths and weaknesses helps make better monetization decisions.