WTF is Bid Shading

WTF is Bid Shading


I’m Tim Peterson, a reporter at Digiday Today let’s talk about how the programmatic auction model is changing and how advertisers are adopting a method called big shading to try to make sure that those changes don’t leave them toe over pay for impressions But how Bid shading could lead to Tech companies pocketing more of the money that you’re spending on programmatic advertising So pretty much every time a Web page loads there auctions that run in the background Teo fill the ad slots on the page So in this case in exchange says Hey I got that impression here Advertisers Who wants it Advertiser one says OK I’m willing to pay $5 for that impression Advertiser too doesn’t know how much Advertiser One’s willing to pay but says a move to pay $4 for that impression option here goes Okay $5 is the highest bidder You win the big But instead of having to pay the $5 that they bid Advertiser one ends up only having to pay a penny more than the second price bid or the runner up So they pay $4.1 That’s how programmatic actions have traditionally run But over the past two years there’s been a shift to a first price option model most recently and most notably with Google’s at exchange adopting first price auction So the first price auction is basically what we think of as a normal auction in the real world Bad impression goes up for bid Besides the one says Hail pay $5 advertising to says Hey will pay $4 $5 is more than $4 so Advertiser one wins the bid but they have to pay the $5 that they bid which is fine super straightforward But in a second price model that advertiser could have paid $4.1 instead of $5 That money adds up so advertisers have had to figure out a way TIO not have to pay quite so much in the first price option been shootings a method that at that companies have come up with tryto make sure that advertised aren’t over pain by as much in the first press auction model Basically advertiser sets their bed of $5 but before the bid actually goes through to the auction the attack come days will have an algorithm kind of figure out Okay it’s $5 actually How much the Sandra says there has to pay in order to win the impression Or is it possible that you know it could go for cheaper with the runner up on Lee be paying $4 in which case maybe we won’t know need a bit as much as $5 They may not know that they could only bid $4 in a penny in order to get the impression but they might be able to surmise based on historical pricing data the publisher running the impression the type of at that it is the audience It’s targeted Teo that you know what Actually we could probably get this for $4.50 And so that’s how Kidd shading works So been training is actually working according TTO automatically become project on the trade desk which I’ll do bitch aiding their offer bitch shading for advertisers advertises on average are saving 20% off their bids as a result of using bid shading in the first price option Well now 20% is a tough pill to swallow for publishers who are losing that 20% of their revenue per impression But cheating is actually becoming something of a tough pill to swallow for advertisers as well So every sizes again worried that bitch eating is a way for companies to be a little shady if they wanted Teo Example First Price option one bits $10 Advertiser tube It’s $5 Advertiser one has an anti Colonial bid shading tool that figures out Oh you actually don’t have to pay $10 You can pay a lot less Let’s say the tech companies tells the advertiser You know you could pay $7 still win this impression So let’s bid $7 advertising says Great I’m saving $3 I’m happy But what if the ad tech company actually knows that the advertiser could have gotten it for $6 is instead tell me Advertiser bid $7 keeping that extra dollar for themselves now to advertisers Are they able to know if this is going on Not really on

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