Key Takeaways:

• Waterfall monetization passes ad requests through networks in a sequential, prioritized order

• It's simpler to implement than header bidding but generally less efficient for maximizing revenue

• Publishers prioritize networks based on historical performance metrics like eCPM and fill rate

• Modern ad tech often uses hybrid approaches combining waterfall with more advanced techniques

So...What Exactly Is Waterfall?

If you've worked in digital advertising for more than five minutes, you've probably heard about "the waterfall." But what the heck is it, and why do people keep talking about it even as newer technologies emerge?

Waterfall monetization (sometimes called the "daisy chain" approach) is one of the oldest techniques for selling ad inventory programmatically. The name makes perfect sense once you understand how it works - ad inventory flows from one ad network to the next, like water cascading down a series of falls, until someone buys it.

How Does Waterfall Monetization Actually Work?

When a user loads a webpage or app with an ad slot, the publisher's ad server kicks into action. Instead of offering that impression to everyone at once, the waterfall method follows these steps:

1. The ad server contacts the first ad network in a pre-determined sequence

2. If that network doesn't buy the impression (or doesn't meet the price floor), the request "falls" to the next network

3. This process continues until an ad network purchases the impression

4. If no network buys it, you might see a house ad or an empty space

The key thing to understand is that these networks are arranged in a specific order - usually based on who historically pays the most. Publishers typically organize their waterfall based on average eCPM (effective cost per thousand impressions) from each source.

The Good: Why Waterfall Still Matters

Despite newer technologies like header bidding, the waterfall approach isn't going away anytime soon. Here's why:

1. Simplicity and Control

The waterfall is relatively straightforward to set up and manage. Publishers maintain direct control over which networks get priority access to their inventory. This gives publishers a sense of predicability that can be comforting.

2. Works With Limited Resources

Small to mid-sized publishers with limited tech resources can implement waterfall with minimal developer involvement. You don't need a team of engineers to maintain it.

3. Reliable Fallback Option

Even publishers using more advanced techniques often keep waterfall as a backstop. If fancy new tech fails, the good ol' waterfall keeps the revenue flowing.

The Bad: Waterfall's Limitations

Waterfall isn't perfect - far from it. Here are the downsides that have pushed the industry toward alternatives:

1. Leaving Money on the Table

The biggest problem? A network further down the chain might have been willing to pay MORE for an impression than the network that bought it higher up. But because of the sequential nature, they never get the chance to bid.

According to Admixer, this inefficiency can result in significant revenue loss for publishers - potentially leaving 15-30% of possible ad revenue uncaptured.

2. Relies on Historical Data

Waterfall depends on past performance to set priorities. This approach can miss real-time fluctuations in demand and pricing, especially during seasonal changes or major events.

3. Lacks Transparency

Publishers often struggle to get clear visibility into the true value of each impression when using waterfall alone. Network pricing and decisioning remains somewhat of a black box.

Waterfall vs. Header Bidding: The Key Differences

The main alternative to waterfall is header bidding, which allows multiple demand sources to bid simultaneously on inventory. Here's a quick comparison:

Is Waterfall Dead in 2025?

Not at all. While header bidding has become increasingly popular, many publishers use hybrid approaches that combine elements of both methods. Some situations where waterfall still makes sense:

• When working with certain legacy ad formats

• For publishers with limited technical resources

• As a backup system when more advanced techniques fail

• In markets where advanced programmatic adoption is still developing

The Bottom Line

Waterfall monetization is like that reliable old car in your garage - not the flashiest option available, but it gets the job done and rarely breaks down. For many publishers, especially those just getting started with programmatic, it remains an important part of their monetization strategy.

Understanding the waterfall model gives you a solid foundation for exploring more advanced techniques like header bidding and real-time bidding. After all, you can't appreciate where ad tech is going without knowing where it's been.

This article is part of our Monetization Minis series, designed to help publishers and adtech professionals understand key concepts in digital advertising and monetization.