What is waterfall?
A waterfall is the older way of selling remnant inventory, in which the publisher's ad server calls demand partners one at a time in a fixed priority order, usually ranked by their historical average price, and passes the impression down the list until someone fills it. Header bidding largely replaced it on the web by letting partners bid at the same time.
Also called: daisy chain, waterfalling, sequential auction, passback chain.
How it works
Each step in a waterfall is its own sale. The ad server offers the impression to the top partner with a floor; if that partner passes, the ad server tries the next one, often with a lower floor. A partner further down might have paid more for this particular impression but never gets asked, and that is the revenue a waterfall leaves behind. Every passback also adds latency.
In OpenRTB terms, each step may be a separate auction with its own bid request, BidRequest.id, and Imp.bidfloor, so buyers can see the same impression more than once at descending floors. When an upstream system makes the final choice among several sources, Source.fd set to 1 tells bidders that winning the exchange auction does not settle the sale.
Waterfalls survive in app monetization, where mediation platforms call ad networks in priority tiers, often mixed with in-app bidding for some partners. When debugging low fill or odd prices on app inventory, find out whether a request came from a bidding step or a waterfall tier, because the floor and the competition differ.
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Related terms
Every term is in the glossary.