What is Waterfall Bidding?
A sequential ad mediation method where ad requests are sent to demand sources one by one in a predetermined priority order based on historical performance.
Waterfall bidding, also known as waterfall mediation, is a traditional method of ad inventory monetization where publishers send ad requests to demand sources (ad networks, DSPs, exchanges) sequentially in a predetermined hierarchy. The order is typically based on historical eCPM performance, with higher-performing networks getting first priority. If the first network cannot fill the request or bids below the floor price, the request "falls" to the next network in line.
Why It Matters
While waterfall bidding was the industry standard for years, it has significant limitations compared to header bidding. It prevents real-time competition between demand sources, potentially leaving revenue on the table when higher-paying networks are lower in the waterfall. However, it still provides predictable revenue streams and simpler technical implementation for some publishers.
How to Calculate
Waterfall performance is measured by Fill Rate at each level = (Filled Requests ÷ Total Requests) × 100%, Overall eCPM = Total Revenue ÷ Total Impressions × 1000, and Waterfall Efficiency = Revenue from top 3 networks ÷ Total Revenue × 100%.
Industry Benchmarks
| Category | Average | Good Performance |
|---|---|---|
| Fill Rate (Tier 1 Networks) | 60-80% | 80%+ |
| Revenue Loss vs Header Bidding | 15-30% | <15% |
| Waterfall Depth | 5-8 partners | 6+ partners |
Best Practices
Regularly analyze and update network priority based on recent eCPM performance. Monitor fill rates and timeout settings for each network. Set appropriate floor prices to maximize revenue while maintaining fill rates. Consider implementing dynamic waterfalls that adjust based on real-time performance. Gradually transition to header bidding for better competition.
Examples
A mobile game app sets up a waterfall: Network A (historical $3.50 eCPM) gets first chance, if they pass or bid under $2.00 floor, it goes to Network B ($3.20 eCPM), then Network C ($2.80 eCPM), and so on until filled or reaching the last network in the chain.
Notes
Many publishers are transitioning from waterfall to header bidding or hybrid approaches due to revenue limitations. Waterfall bidding can create latency issues as each network in sequence adds loading time. The predetermined order prevents real-time price discovery and competition between demand sources.