Waterfall vs. SDK vs. Open Bidding: Which Monetization Model is Best for Your App?

For app publishers, monetizing your app can be the difference between running a side project and building a thriving business. Global ad spending in the in-app advertising market is projected to reach $390.04 billion by 2025. The recent numbers are a clear signal of the massive revenue opportunity.

But choosing one is a hassle with multiple monetization models like SDK bidding, Waterfall mediation, and Open Bidding.

Each model has their pros, cons, and revenue potential. In this guide, we’ll explain how each model works and how they compare to help you make an informed decision.

What is SDK Bidding? (And Why It Matters for App Publishers)

SDK bidding is when every ad impression in your app triggers a live auction, where multiple advertisers bid to display their ad, and the highest bidder wins.

The model is a game-changing way to monetize your app by letting third-party ad networks and demand partners bid in real-time for each ad impression.

How SDK Bidding Works

1. When a user opens your app, an ad opportunity is triggered.
2. All integrated SDKs from different ad networks receive the request simultaneously.
3. Each network sends a real-time bid, based on user and context data.
4. The highest bidder wins, and the ad is shown to the user instantly.

For example:
Imagine you have integrated two networks: Network A bids $2.50 and Network B bids $3.00 for the same impression.
With SDK Bidding, Network B wins, and you earn more.

Why Choose SDK Bidding (Benefits Inside!)

1. Higher Revenue
   Since every network competes in real-time, you maximize the value of each impression.
2. Real-Time Demand Liquidity
   You gain access to more bidders, including DSPs, trading desks, and ad networks, increasing competition and fill rates.
3. Less Waterfall Management
   There’s no more manually updating waterfall orders across multiple ad formats, countries, and instances. This saves a lot of time and operational headaches.
4. Better Measurement and Viewability
   Using dedicated SDKs improves data accuracy, like better viewability rates, which are often underreported via server-side solutions.

Limitations of SDK Bidding

1. SDK Integration Complexity
   Every bidder requires its own SDK to be integrated into your app, which can increase the app’s size and technical complexity.
2. Potential App Size Growth
   More SDKs can mean a heavier app. It could affect load times or be counterintuitive for app store optimization.

What is Open Bidding and Why It Matters for App Publishers?

Open Bidding (formerly known as Exchange Bidding) is Google Ad Manager’s server-to-server auction solution. This model allows multiple third-party SSPs (supply-side platforms) and exchanges to compete for your ad inventory. This competition includes Google’s Ad Exchange (AdX), all within a single real-time auction.

For app publishers, Open Bidding is a game-changer because it generates more advertising demand for each impression. It helps increase ad revenue while significantly reducing complexity and latency.

How Open Bidding Works (Step-by-Step)

1. The user interacts with the mobile app, such as completing a level, triggering an ad request.
2. The app generates an ad request, and request data (user, device, targeting info) is sent to Google Ad Manager via the Google Mobile Ads SDK.
3. Ad Manager selects eligible line items and activates yield groups (which include your open bidding partners).
4. Bid requests are sent from Ad Manager servers to all demand partners (SSPs + AdX) in real time.
5. All bids are collected and compared in a unified auction.
6. The highest bid wins, and the winning ad creative is returned to the app via the Google Mobile Ads SDK to be served to the user.
   For example
   Imagine you have a mobile game with an ad slot for a banner. When a player finishes a level, an ad request is made. Google Ad Manager sends that request to AdX, Index Exchange, and OpenX. Each SSP submits a bid:
   • AdX: $1.20
   • OpenX: $1.35
   • Index Exchange: $1.10
   • Google runs the auction. OpenX wins with $1.35, and their creative is shown in your app. Google pays you, and you see all of the revenue in one report.

Why Choose Open Bidding? (Benefits Inside!)

• Higher Revenue: More demand sources bidding means higher competition and a better yield for each impression.
• Low Latency: Since bidding happens on Google’s servers, it minimizes lag and improves user experience.
• Simplified Setup: No need for complex in-app header bidding code. You use your existing SDK integration.
• Unified Reporting & Payments: Google handles billing and reporting, giving you one payment and consistent data.
• Easy Partner Management: Add or remove demand partners through the Google Ad Manager interface.

Limitations of Open Bidding

• Limited User Data: Server-side auctions don’t rely on cookies or local identifiers. It may lead to less personalized ads.
• Reduced Transparency: Publishers can’t see every individual bid or get full auction-level insights due to Google’s control of the auction process.

What is Waterfall Mediation?

Waterfall Mediation is a traditional method app publishers use to sell ad impressions by calling demand sources (ad networks or DSPs) one at a time in a fixed priority order. The goal is to fill an ad slot, but each network is only given the opportunity if the one before doesn’t fill the request.

How Does It Work?

1. Publishers rank ad networks based on historical eCPM performance.
2. When an ad impression is available, the mediation platform sends a request to the top-ranked network.
3. If that network can’t fill the request (e.g., due to targeting or price floor), the request falls to the following network.
4. This continues until an ad is served or all networks pass.

For example 

Imagine you have 3 ad networks set up in this priority order based on their historical eCPM:

1. Network A (historical eCPM: $2.00)
2. Network B (historical eCPM: $1.50)
3. Network C (historical eCPM: $1.00)

A user opens your app and triggers an ad request:

• The request is sent to Network A. It can’t fill the request due to a geo mismatch.
• The request falls to Network B. It also passes.
• Finally, the request reaches Network C, which serves the ad at $1.00.

Why Choose Waterfall Mediation?

• Simple to Set Up: Easy to understand and manage for small publishers with small teams.
• Predictable Fill: Based on past performance, ensuring somewhat consistent fill rates.
• Familiar Model: Many ad networks still support waterfall-style integration.

Limitations of Waterfall Mediation

• Lost Revenue Opportunities: Higher-paying networks ranked lower may never get the chance to bid.
• Low Competition: Only one network gets to bid at a time, reducing actual market demand.
• Manual Optimization Needed: Requires regular updates to network order based on performance.

Please read: Ad Mediation Platforms Explained.

Waterfall vs SDK Bidding Vs Open Bidding: A Head-to-Head Comparison

Below, we have compared the three models head-to-head so publishers can understand which would best suit their needs.

Key Takeaway: 

• Waterfall Bidding is simple but outdated, with limited competition and missed revenue.
• SDK Bidding offers the highest revenue potential but comes with SDK management overhead.
• Open Bidding is a scalable alternative with less app impact and unified reporting, which is ideal for publishers already using Google Ad Manager.