What is Bid Shading?
A technique in first-party auctions to optimize the bid price without reducing the chance of winning. So basically an algorithm that arrives at a price optimization strategy considering factors like pricing, website, exchange in place as well as a competitive environment.
The shift started happening after Google's announcement of moving to first-party auction model.
Done by DSPs or Exchanges since they moved to first-price auctions. DSPs are in the best position to do Bid-shading as they have a complete picture of the bid data.
Hence taking away any advantage that Publishers had in the short term.
The shift started happening after Google's announcement of moving to first-party auction model.
Done by DSPs or Exchanges since they moved to first-price auctions. DSPs are in the best position to do Bid-shading as they have a complete picture of the bid data.
Hence taking away any advantage that Publishers had in the short term.
They look at the holistic view of the competitive environment to arrive at the price for an advertiser while bidding for an impression. So there is a trade-off here, as you loose quality impressions in case you cannot win at the right price.
Google: Optimize fixed CPM bidding
Rubicon Project: EMR or Estimated market rate
Pubmatic: Intelligent bidding
Trade desk: KOA
Bid shading has reduced CPMs for publishers and there is more downside in the future as algorithms improve.
More transparency is required to show the delta in value in cases where Bid shading was applied.
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