Programmatic · also called daisy-chaining, waterfalling, sequential auction
Waterfall (daisy-chaining)
A waterfall is an older way of selling ads in which an impression is offered to demand partners one at a time, in fixed priority order, until one fills it.
In a waterfall, the publisher ranks its ad networks and exchanges, usually by historical average eCPM. The impression goes to partner 1 with a minimum price; if partner 1 passes, it "falls" to partner 2 at a lower price, and so on. Each hop adds delay, and each partner only sees what the ones above did not want.
The flaw is that ranking by averages ignores what a partner would pay for this particular impression. Partner 4 might have paid more for this user than partner 1, but never got the chance. Waterfalls also created "daisy chains" of passbacks that added latency and discrepancies.
Header bidding on the web and in-app bidding in apps largely replaced waterfalls with simultaneous auctions. But hybrid waterfalls survive, especially in app ad mediation, where some networks still cannot bid in real time.
Think of it like this
A waterfall is like offering a used car to buyers strictly in turn, each at a lower asking price, instead of letting them all bid at once.
An example
Network A has a US$3 floor and passes; Network B at US$2 passes; Network C buys at US$1.50. Meanwhile Network D, fourth in line, would have paid US$3.40 for this user.
Related terms
Header bidding
Header bidding is a technique where a publisher offers each ad impression to many SSPs and exchanges simultaneously before calling its ad server, so all buyers compete at once.
Ad mediation
Ad mediation is software that lets app developers connect many ad networks and bidders through one SDK and chooses which network fills each ad request to maximise revenue.
In-app bidding
In-app bidding is a real-time auction inside mobile apps where multiple ad networks and buyers bid simultaneously for each ad impression, replacing the sequential mediation waterfall.
eCPM (effective CPM)
eCPM (effective CPM) is the revenue or cost per thousand impressions calculated after the fact, which lets you compare ads sold on CPM, CPC, CPA or other models.
Unified auction
A unified auction is a single auction in which all demand sources, such as direct campaigns, header bidders and exchanges, compete for an impression under the same rules at the same time.