What is an ad waterfall, and what does it mean for buyers?
Part of Supply path transparency
The short answer
An ad waterfall sells an impression by offering it to one demand source at a time, in an order and at prices the publisher sets in advance, until one accepts. Header bidding asks sources at once instead, yet waterfalls remain in mobile app mediation and as a fallback behind header auctions.
Key takeaways
- A waterfall ranks demand sources by expected value, such as past average prices, not by what each would pay for this impression.
- The first source that accepts wins, so a source lower down that would have paid more may never be asked.
- App mediation platforms still run waterfalls, including hybrid groups where a bidding auction winner joins the sequence.
- Buyers lower in a waterfall see only impressions the sources above them passed on, and one opportunity can produce several requests.
What is an ad waterfall?
Definition
- Ad waterfall
- A way of selling ad space in which the publisher offers each impression to demand sources one after another, in a preset order with a price for each, and the first to accept wins.
A popular approach to selling online advertising is by a waterfall, where a publisher makes sequential price offers to ad networks for an inventory, and chooses the winner in that order.
The key word is sequential. A later paper on waterfall optimization (opens in a new tab) by Halbersberg, Halevi and Salhov puts it the same way: the publisher "controls the order and prices of the waterfall in an attempt to maximize his revenue." Nothing in that design compares every source's price for the same impression. The order is a forecast, and the impression goes to whoever accepts first.
How did waterfall auctions work?
The 2019 measurement study No More Chasing Waterfalls (opens in a new tab), presented at ACM IMC 2019, describes the classic web setup. The publisher's ad server or SSP ranks ad networks in hierarchical levels; when network one returns no bid, a new auction starts for network two, and so on. The authors write that priorities are typically set not in real time but on the average price of past purchases for each channel, and that unsold slots may fall to a backfill channel for remnant inventory.
One impression moving down a waterfall
- Rank the sources. The publisher orders its networks by expected value, using past average prices or values it enters by hand.
- Offer at the top. The ad server calls the first source with a minimum price for that position.
- Accept or pass. If the first source fills at or above that price, it wins and the sequence stops.
- Move down a level. If it passes, the next source is called at a lower price, with a new auction inside that network.
- Fall back. If no source fills, the slot goes to a backfill source or stays empty.
Why did publishers move away from waterfalls?
The cost is in the ordering. The IMC study gives the plain case: if the winning bid at network one is $0.20, the slot sells even if network two held a $0.50 bid. The same authors note a transparency gap, since publishers did not learn who else bid or for how much, and a control gap, since they could not switch channels in real time. Header bidding, they write, aims to give publishers back control of their inventory and to increase transparency, fairness and competition among advertisers. The header bidding glossary explains how that simultaneous auction runs.
The study also found the two models side by side. Partners could compete for the same slot more than once, first in header bidding and then in the regular waterfall, because a publisher may still fall back to the waterfall when header bids do not reach high enough prices. On the web the waterfall became a fallback behind the header auction rather than disappearing.
Where are waterfalls still used?
Mobile app mediation is the clearest documented case. Google's AdMob help center describes waterfall ad sources that "rely on user-provided eCPMs or historical data to determine their order in the mediation waterfall", alongside bidding sources that compete in an auction. The table collects what Google's pages said when checked in October 2026.
Definition
- Hybrid mediation
- Google's term for a mediation group that holds both bidding and waterfall ad sources: the bidding auction runs in real time, and its winner is then placed in the waterfall by eCPM alongside the waterfall sources.
| Setting | What Google's page says | What it means for a buyer |
|---|---|---|
| Waterfall ad sources (AdMob 13404328) | Order comes from user provided eCPMs or historical data | The position reflects an estimate, not a live price for the impression |
| Hybrid mediation group (AdMob 13411971) | The bidding winner "is then placed in the mediation waterfall alongside your waterfall ad sources" | A winning bid can still lose to a waterfall source with a higher eCPM |
| Optimized waterfall sources (AdMob 3379773) | The eCPM "will be regularly updated based on historical data"; starting can take up to 3 days | Optimization moves a source's place over time, not per impression |
| Ads Activity report (AdMob 10979428) | Some requests "may be counted more than once as the request moves through the mediation waterfall" | Request counts on app inventory can overstate unique opportunities |
| DSP buying (Display & Video 360 announcement) | From October 23, 2024, it would stop bidding on multiple waterfall calls to Google Ad Manager and the AdMob Network | One DSP limited repeat bidding on waterfall calls for app inventory |
Google's page on mediation groups (opens in a new tab) gives its own example: an exchange wins the bidding auction at $4, but a network with a $5 eCPM sits above it, so the network serves if it has an ad and the exchange gets the chance only if it does not. The app placements guide covers app buying from the Google Ads side.
How does a waterfall affect what buyers see?
A buyer working through a source low in a waterfall sees a filtered stream: only impressions every source above declined. The same reader on the same app can appear through several sources in a short time as one opportunity moves down the sequence. OpenRTB 2.6 has no field for waterfall position, but its Source object exists for cases where the exchange does not make the final decision and names a mediation platform as one such upstream entity; an fd value of 1 says the final sale decision sits upstream.
Signs that app inventory reaches a buyer through a waterfall
- The request carries source.fd set to 1, or a displaymanager value naming a mediation SDK.
- The same app and placement arrive through several networks within seconds.
- Win rates on an app stay low despite bids above its stated floor, because a source above takes the impression first.
- The schain shows a network node before the exchange that sent the request.
- The app's app-ads.txt lists several networks as RESELLER for the same placement type.
None of these signs makes the inventory bad. They change how a buyer reads win rates and request volume, and they argue for buying each app through the path closest to its developer, which the app-ads.txt guide helps confirm.
What does a waterfall review look like on a real plan?
Fictional example
A car rental brand in Las Vegas, Reno and Salt Lake City
A fictional regional car rental brand wants ads in travel planning, airport, weather and navigation apps used in Nevada and Utah, plus travel and local news websites. Its desk buys apps through one DSP on two exchanges.
Bid logs show one weather app arriving through three networks in quick succession for the same placement, each request with fd set to 1. The desk's win rate on the app is low even when it bids above the floor. The app's app-ads.txt lists its own account on one exchange as DIRECT and the other networks as RESELLER.
The desk targets the app only through the DIRECT path, records that the app runs a hybrid mediation setup with waterfall sources above the exchange, and asks the developer whether a deal could give the brand earlier access. The websites on the plan, sold through header bidding, need no change.
How does PlacementGraph show how a website is sold?
Frequently asked questions
Does waterfall optimization turn a waterfall into a real time auction?
No. AdMob's help center says an optimized source's eCPM is regularly updated based on historical data, and that optimization can take up to 3 days to begin. The order moves over time, but each impression is still offered in sequence, so a source's position reflects past performance rather than its price for that impression.
Why did Display & Video 360 stop bidding on waterfall calls?
Google announced that from October 23, 2024 the DSP would stop bidding on multiple waterfall calls to Google Ad Manager and the AdMob Network for mobile app inventory, across mediation platforms. Its stated aim was to buy app inventory mainly through real time bidding, which it said helps advertisers bid more efficiently.
Is a waterfall the same as a priority order in an ad server?
They are related. An ad server can rank direct campaigns and other demand by priority, and the IMC study describes the waterfall as that prioritization applied across ad networks, each called in turn. A waterfall is the sequence of calls; priority is the rule that sets its order.
Can a buyer win a waterfall impression with a higher bid?
Only if its source is asked. A buyer's bid competes inside the network it reaches, and that network competes against the waterfall's order. In Google's hybrid example a $4 winning bid waits behind a network with a $5 eCPM, so bidding more inside a lower source does not move it up the sequence.
What is backfill at the bottom of a waterfall?
Backfill is the last resort for an impression no ranked source took. The IMC study describes it as another channel for remnant inventory, used when there is neither a direct order nor a bid in the auctions above. Buyers reaching inventory through backfill are buying what every higher level of the sequence passed on.
Sources
- Waterfall Bandits: Learning to Sell Ads Online (opens in a new tab)Kveton, Mahdian, Muthukrishnan, Wen and Xian, arXiv, April 2019
- Search and Score-based Waterfall Auction Optimization (opens in a new tab)Halbersberg, Halevi and Salhov, arXiv, revised April 2022
- No More Chasing Waterfalls: A Measurement Study of the Header Bidding Ad-Ecosystem (opens in a new tab)Pachilakis, Papadopoulos, Markatos and Kourtellis, ACM IMC 2019 (arXiv)
- Set up a waterfall ad source (opens in a new tab)Google AdMob Help
- About AdMob mediation groups (opens in a new tab)Google AdMob Help
- Manage waterfall ad source credentials and optimization (opens in a new tab)Google AdMob Help
- Using your Ads Activity report (opens in a new tab)Google AdMob Help
- Display & Video 360 announcements (September 23, 2024 edition) (opens in a new tab)Google, Display & Video 360 Help
- OpenRTB 2.6 specification (opens in a new tab)IAB Tech Lab, OpenRTB 2.x repository
Researched and written by PlacementGraph Research. Read how we research, source and update these pages. Corrections: diana@placementgraph.com.