Bid Shading

Bid Shading is a programmatic technique that allows advertisers to avoid overpaying in first-price auctions. It uses machine learning algorithms to predict the optimal bid price—high enough to win the auction but lower than the full bid amount.

Before bid shading, advertisers often paid more than necessary when switching from second-price to first-price models. Bid shading analyzes historical data such as clearing prices, placement performance, and competition levels to recommend the most efficient bid.

This practice benefits advertisers by lowering average CPMs while preserving win rates. It is now a standard feature in most demand-side platforms, ensuring fair pricing in an increasingly competitive RTB environment.

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