What Is Bid Shading? Bid shading is a strategy used by demand-side platforms (DSPs) in first-price auctions to reduce how much they pay while still winning the bid. Instead of bidding the full amount an advertiser is willing to pay, the DSP analyzes past auctions and offers a slightly lower bid that still has a good chance of winning. This technique emerged as ad exchanges moved from second-price to first-price auctions, forcing buyers to adapt or risk overpaying. Why Buyers Use Bid Shading In a second-price auction, the winner only had to pay slightly more than the second-highest bid. But in a first-price model, they pay what they bid. This can drive up costs unless buyers use bid shading to estimate the lowest amount needed to win without sacrificing delivery. For advertisers, bid shading means more efficient ad spend. For publishers, however, it can reduce CPMs if not properly managed. How Bid Shading Affects Publisher CPM At first glance, bid shading might seem like a b...
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