Publishers initially sell premium ad inventory via direct sales to advertisers. Following this, the publisher’s ad server offers unsold inventory to ad networks, one after another, based on a ranking system set up by the publisher. This process is known as waterfalling (or daisy chain).

When the first ad network doesn’t deliver an ad, a tag initiates a call to the second ad network, and so on, until an ad is delivered.

Publishers use waterfalling to prioritise demand sources and maximise yield for remnant inventory, but the further down the waterfall the inventory travels, the lower the yield and the more time it takes, which has led to the rise of header bidding.