What is Bid Shading? Behind the Platform

What is Bid Shading? Behind the Platform

Bid shading is a campaign capability that can save advertisers money. Here’s what it means and how it works.

What is Bid Shading?

First, some background: Second price auctions incentivized bidding at the price of the value. First price auctions incentivize bidding at the lowest price that will win the auction, or the price of the value – whichever is lower. First price auctions now make up the majority of programmatic auctions. 

Bid shading reduces the bid price to save money on first price auctions (first price sealed-bid auctions/blind auctions). And because of the scale of programmatic first price auctions, Bidtellect is in a position to have a good sense of what the lowest winning price of a slice of inventory is. 

How Does It Work

Bidtellect already helps our advertisers understand what the value of any slice of inventory is worth to their optimization goals, but now we can help our advertisers make that second part of the decision: What is the lowest price we can bid and still win?

Below is what a typical Win Rate vs. Bid Price curve looks like. There’s some range of bid prices where Bidtellect won’t do anything because the bid price really impacts the win rate. But take this example: If you value a slice of inventory much higher than $6, you’re really just throwing away inventory because your win rate doesn’t increase substantially. Let’s say you value the slice of inventory at $10 based on your optimization goals. With bid shading turned on, we will take a $10 bid and we’ll reduce it down to $6 and save you that $4 without impacting the outcome of the auction.

Win Rate vs. Bid Price curve BID SHADING

What Are the Benefits?

Bidtellect has the best optimization to determine price to value for each auction according to our 14 optimization goals and multiple goals

Layering our new bid shading technology will increase performance, save money, and maximize advertiser’s value.

Bid Shading Fees

Bidtellect will charge 20% of SAVINGS found by bid shading

If our bid shading did not find savings, you will not be charged

Example: If the bid price before bid shading was $5, and Bidtellect’s bid shading reduced the price to $4, the advertiser will be charged $0.20 as the bid shading fee