<div class="sub-cat-page-holder"><div class="sub-cat-page-img"><img src="https://persona.ly/glossary/wp-content/uploads/2020/02/group-5.svg"/></div><div class="sub-cat-page-h-holder"><h2 class="sub-cat-page-title">Real-time bidding</h2><h4 class="sub-cat-page-subtitle"><span class="sub-cat-page-subtitle">Bid Shading &#8211; Making the Most of First-Price Auctions</span><span class="csr-page-counter"> -> Page <span class="max-for-title">1 of <span class="sub-cat-max-page"></span></span></span></h4></div></div><div class="search-sidebar-holder"><a href="/glossary/"><h3 class="search-sidebar-holder-title">UA Glossary</h3></a>[vc_widget_sidebar sidebar_id="archive-page-sidebar" el_class="front-page-sidebar-holder"]<div class="search-sidebar-footer-holder"></div></div>{"id":1329,"date":"2022-08-11T11:10:51","date_gmt":"2022-08-11T11:10:51","guid":{"rendered":"https:\/\/persona.ly\/glossary\/?page_id=1329"},"modified":"2022-08-14T14:32:11","modified_gmt":"2022-08-14T14:32:11","slug":"bid-shading-making-the-most-of-first-price-auctions","status":"publish","type":"page","link":"https:\/\/persona.ly\/glossary\/real-time-bidding\/bid-shading-making-the-most-of-first-price-auctions\/","title":{"rendered":"Bid Shading &#8211; Making the Most of First-Price Auctions"},"content":{"rendered":"<p>[vc_row el_class=&#8221;front-hero-section&#8221;][vc_column width=&#8221;1\/2&#8243; css=&#8221;.vc_custom_1582730807176{background-image: url(https:\/\/persona.ly\/glossary\/\/wp-content\/uploads\/2020\/02\/group-19.svg?id=58) !important;background-position: center !important;background-repeat: no-repeat !important;background-size: contain !important;}&#8221; el_class=&#8221;hero-first-section&#8221;][vc_column_text el_class=&#8221;page-heading&#8221; css=&#8221;.vc_custom_1593096625729{margin-top: 30px !important;}&#8221;]<\/p>\n<h1><a href=\"\/glossary\/\">UA <span class=\"color-ancient\">Glossary<\/span><\/a><\/h1>\n<p>[\/vc_column_text][vc_column_text]<p>Your source for everything mobile UA, from the basics to contentious standards, the glossary can help and inform both aspiring growth managers and experienced mobile app developers<\/p>\n[\/vc_column_text]<div class=\"ult-spacer spacer-69dc6a784619d\" data-id=\"69dc6a784619d\" data-height=\"105\" data-height-mobile=\"0\" data-height-tab=\"\" data-height-tab-portrait=\"\" data-height-mobile-landscape=\"0\" style=\"clear:both;display:block;\"><\/div>[\/vc_column][vc_column width=&#8221;1\/2&#8243;][vc_single_image image=&#8221;60&#8243; img_size=&#8221;full&#8221; alignment=&#8221;center&#8221; el_class=&#8221;hero-section-image&#8221;][\/vc_column][\/vc_row][vc_section css=&#8221;.vc_custom_1583428025692{background-image: url(https:\/\/persona.ly\/glossary\/\/wp-content\/uploads\/2020\/03\/bg_repeater_with_bg_svg.svg?id=320) !important;}&#8221; el_class=&#8221;post-content-section archive-page-custom&#8221;][vc_row el_class=&#8221;covered-grace-font&#8221;][vc_column width=&#8221;2\/3&#8243; el_class=&#8221;gap-in-end&#8221;][vc_column_text][\/vc_column_text][vc_column_text]<style>.wp-show-posts-columns#wpsp-1339 {margin-left: -2em; }.wp-show-posts-columns#wpsp-1339 .wp-show-posts-inner {margin: 0 0 2em 2em; }<\/style><section id=\"wpsp-1339\" class=\" wp-show-posts\" style=\"\"><article class=\" wp-show-posts-single wpsp-clearfix post-1323 post type-post status-publish format-standard hentry category-bid-shading\" itemtype=\"http:\/\/schema.org\/CreativeWork\" itemscope><div class=\"wp-show-posts-inner\" style=\"\">\t\t\t\t\t\t<header class=\"wp-show-posts-entry-header\">\n\t\t\t\t\t\t\t<h1 class=\"wp-show-posts-entry-title\" itemprop=\"headline\"><a href=\"https:\/\/persona.ly\/glossary\/bid-shading-making-the-most-of-first-price-auctions\/\" rel=\"bookmark\">Bid Shading &#8211; Making the Most of First-Price Auctions<\/a><\/h1><div class=\"wp-show-posts-entry-meta wp-show-posts-entry-meta-below-title post-meta-inline\"><span class=\"wp-show-posts-posted-on wp-show-posts-meta\">\n\t\t\t\t\t<a href=\"https:\/\/persona.ly\/glossary\/bid-shading-making-the-most-of-first-price-auctions\/\" title=\"10:45 am\" rel=\"bookmark\"><time class=\"wp-show-posts-entry-date published\" datetime=\"2022-08-11T10:45:36+00:00\" itemprop=\"datePublished\">August 11, 2022<\/time><time class=\"wp-show-posts-updated\" datetime=\"2022-08-15T08:37:11+00:00\" itemprop=\"dateModified\">August 15, 2022<\/time><\/a>\n\t\t\t\t<\/span><\/div>\t\t\t\t\t\t<\/header><!-- .entry-header -->\n\t\t\t\t\t\t\t\t\t\t\t<div class=\"wp-show-posts-entry-content\" itemprop=\"text\">\n\t\t\t\t\t\t\t<p>[vc_row][vc_column el_class=&#8221;normal-text&#8221;][vc_column_text]<span style=\"font-weight: 400;\"><strong>Bid shading,<\/strong> a practice used by programmatic bidders to eliminate the risk of overbidding in the realm of first-price auctions, is gaining traction in the programmatic industry. Before getting to know bid shading better, let\u2019s take a dive into a brief history of auction types in programmatic ad auctions.<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;Industrial Shift to First-Price Auctions&#8221; use_theme_fonts=&#8221;yes&#8221; el_class=&#8221;styled-heading blue-back&#8221; link=&#8221;url:%23|||&#8221;][vc_column_text]<span style=\"font-weight: 400;\">In <a class=\"custom-link-content\" href=\"https:\/\/persona.ly\/glossary\/real-time-bidding\/the-basics-of-rtb\/\">RTB<\/a> (Real-Time Bidding), multiple <a class=\"custom-link-content\" href=\"https:\/\/persona.ly\/glossary\/real-time-bidding\/choosing-a-dsp\/&quot;\">DSPs<\/a> (demand-side platforms) compete to display an ad to a specific user on the publisher\u2019s inventory (i.e., ad space within an app or website). As essentially all major SSPs (supply-side platforms) operate with the CPM model, their direct interest is to sell the inventory at a higher price to maximize the publisher&#8217;s ad revenue (and, obviously, their share of it).\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">For over a decade, all SSPs operated with the second-price auction model. In the second-price auction, a bidder would pay the price of the second-highest bid +$0.01.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">This all began to change when SSPs started moving to the first-price auction model, where the highest bidder pays the full price of their bid. Google was the first to make the change to its entire inventory, and all exchanges followed suit within a couple of years.\u00a0<\/span>[\/vc_column_text][vc_column_text]<!-- Widget Shortcode --><div id=\"custom_html-7\" class=\"widget_text widget widget_custom_html widget-shortcode area-sidebar-form-mobile \"><div class=\"textwidget custom-html-widget\"><div class=\"subscribe-footer-from-holder sidebar-form-intouch\">\r\n<h3>Looking for app growth opportunities?<\/h3>\r\n<p>Leave your email and we'll get \r\nback to you!<\/p>\r\n<form class=\"subscribe-footer-from\">\r\n\t<div class=\"subscribe-footer-from-email-holder\"><input type=\"email\" class=\"subscribe-footer-email\" placeholder=\"Enter your email\"><\/div>\r\n<button class=\"subscribe-footer-submit\">\r\n\tGet in Touch\r\n<\/button>\r\n<\/form>\r\n<\/div>\r\n<div class='subscribe-footer-from-thankyou gsifthy'>\r\n\t<img alt=\"\" src=\"\/glossary\/wp-content\/uploads\/2020\/08\/02.svg\">\r\n<h3>Thank you for your interest!<\/h3>\r\n<p>Our team will contact you with more details.<\/p>\r\n<\/div>\r\n<div class=\"search-sidebar-footer-holder gisf\"><\/div><\/div><\/div><!-- \/Widget Shortcode -->[\/vc_column_text][vc_single_image image=&#8221;1013&#8243; img_size=&#8221;full&#8221; alignment=&#8221;center&#8221; el_class=&#8221;single-post-image-back&#8221;][vc_column_text]<span style=\"font-weight: 400;\">While publishers and SSPs are the direct beneficiaries in the chain from first-price auctions, the buyers (advertisers and DSPs) are forced to be more cost-aware and not \u201coverbid\u201d the market by too much.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">These days, the vast majority of SSPs are running on a first-price auction model. This forces buyers to face the dilemma of how high they should bid to win the auction without overpaying above its market value. The industry shift made DSPs adjust to the current situation and develop solutions to make sure they pay exactly as much as needed to win the impression.<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;What Is Bid Shading?&#8221; use_theme_fonts=&#8221;yes&#8221; el_class=&#8221;styled-heading blue-back&#8221; link=&#8221;url:%23|||&#8221;][vc_column_text]<span style=\"font-weight: 400;\"><em>Bid shading<\/em> is a practice used by programmatic bidders to predict the market price of auctions based on historical data and bid accordingly. By correcting your bid to be just high enough to win the auction, bid shading helps you avoid significant overpaying.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Having access to the historical record of what amount was spent in the past for the same bid\u2014taking into consideration the app, placement, ad format, historical user data (for Android campaigns), and at what price the previous bids were lost<\/span><span style=\"font-weight: 400;\">\u2014<\/span><span style=\"font-weight: 400;\">the algorithm on the DSP side can decide how much to bid on the impression.<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;The Essence of Bid Shading&#8221; font_container=&#8221;tag:h3|text_align:left|color:%23191536&#8243; use_theme_fonts=&#8221;yes&#8221; el_class=&#8221;styled-subheading&#8221;][vc_column_text]<span style=\"font-weight: 400;\">To understand the essence of bid shading, imagine you need to take a bus that circulates once an hour.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Sometimes the bus arrives on time, but it can frequently arrive a few minutes earlier or later. If you miss the bus, you will have to wait an extra hour for the next one. At the same time, you don\u2019t want to be at the bus stop too early and waste precious time.\u00a0<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Now, you have historical data that allows you to estimate how much earlier the bus can arrive, on average. Based on this historical data (that you painfully gathered showing up to the office an hour late), the natural thing to do is to arrive a couple of minutes earlier, just on time to catch the bus if it arrives before its scheduled time. And, worst case scenario, you\u2019ll end up waiting a few more minutes if it\u2019s running late.\u00a0<\/span><\/p>\n<p>[\/vc_column_text][vc_single_image image=&#8221;1346&#8243; img_size=&#8221;full&#8221; alignment=&#8221;center&#8221; el_class=&#8221;single-post-image-back&#8221;][vc_column_text]<\/p>\n<p><span style=\"font-weight: 400;\">Internally, we call this bus-shading. And no, it\u2019s not weird that we obsess over industry terms and let it leak into our commute considerations<\/span><span style=\"font-weight: 400;\">\u2014<\/span><span style=\"font-weight: 400;\">you don\u2019t have to be so judgemental.<\/span><\/p>\n<p><span style=\"font-weight: 400;\">Bid shading works in the same way: The algorithm is adjusted to win the auction and helps advertisers avoid overpaying for the impression.<\/span>[\/vc_column_text]<div class=\"aio-icon-component   info-noty style_1\"><div id=\"Info-box-wrap-2186\" class=\"aio-icon-box left-icon\" style=\"\"  ><div class=\"aio-icon-left\"><div class=\"ult-just-icon-wrapper  \"><div class=\"align-icon\" style=\"text-align:center;\">\n<div class=\"aio-icon-img \" style=\"font-size:71px;background:rgba(255,255,255,0.01);display:inline-block;\" >\n\t<img class=\"img-icon\" alt=\"null\" src=\"https:\/\/persona.ly\/glossary\/wp-content\/uploads\/2020\/03\/combined-shape-1.svg\"\/>\n<\/div><\/div><\/div><\/div><div class=\"aio-ibd-block\"><div class=\"aio-icon-header\" ><h3 class=\"aio-icon-title ult-responsive\"  data-ultimate-target='#Info-box-wrap-2186 .aio-icon-title'  data-responsive-json-new='{\"font-size\":\"\",\"line-height\":\"\"}'  style=\"color:#191536;\">Taking Bid Shading Further<\/h3><\/div> <!-- header --><div class=\"aio-icon-description ult-responsive\"  data-ultimate-target='#Info-box-wrap-2186 .aio-icon-description'  data-responsive-json-new='{\"font-size\":\"\",\"line-height\":\"\"}'  style=\"color:#191536;\">Smart players take bid shading even further. Combining machine learning capabilities, unattributed first-party data analysis, historical data from\u00a0the\u00a0a\u00a0DMP, and data received from SSPs, DSPs predict the LTV of a user. This allows them to adjust the bid price in real-time based on the perceived value of the user and how high the ROAS will be for the user.<\/div> <!-- description --><\/div> <!-- aio-ibd-block --><\/div> <!-- aio-icon-box --><\/div> <!-- aio-icon-component -->[vc_column_text]<span style=\"font-weight: 400;\">As such, DSPs can identify which users are likely to fit the \u201cperfect\u201d user criteria and bid higher while bidding lower on those who are still relevant but bring lower LTV.<\/span>[\/vc_column_text][vc_custom_heading text=&#8221;Who Benefits from Bid Shading? &#8221; use_theme_fonts=&#8221;yes&#8221; el_class=&#8221;styled-heading blue-back&#8221; link=&#8221;url:%23|||&#8221;][vc_column_text]<span style=\"font-weight: 400;\">Among DSPs, only a few of the most sophisticated players can actually claim that they\u2019ve implemented bid shading in their toolkit. These are the players who have gathered sufficient data throughout years of extensive work and research, armed with machine learning capabilities and having access to major data points needed to build high-probability prediction models.<\/span>[\/vc_column_text]<div class=\"aio-icon-component   info-noty blue-noty style_1\"><div id=\"Info-box-wrap-5391\" class=\"aio-icon-box left-icon\" style=\"\"  ><div class=\"aio-icon-left\"><div class=\"ult-just-icon-wrapper  \"><div class=\"align-icon\" style=\"text-align:center;\">\n<div class=\"aio-icon-img \" style=\"font-size:71px;background:rgba(255,255,255,0.01);display:inline-block;\" >\n\t<img class=\"img-icon\" alt=\"Info Container\" src=\"https:\/\/persona.ly\/glossary\/wp-content\/uploads\/2020\/03\/combined-shape-2.svg\"\/>\n<\/div><\/div><\/div><\/div><div class=\"aio-ibd-block\"><div class=\"aio-icon-header\" ><h3 class=\"aio-icon-title ult-responsive\"  data-ultimate-target='#Info-box-wrap-5391 .aio-icon-title'  data-responsive-json-new='{\"font-size\":\"\",\"line-height\":\"\"}'  style=\"color:#191536;\">Making the Most of Bid Shading<\/h3><\/div> <!-- header --><div class=\"aio-icon-description ult-responsive\"  data-ultimate-target='#Info-box-wrap-5391 .aio-icon-description'  data-responsive-json-new='{\"font-size\":\"\",\"line-height\":\"\"}'  style=\"color:#191536;\"><span style=\"font-weight: 400;\">Most savvy advertisers working directly with major <em>ML-driven DSPs<\/em>, like Persona.ly, gain the most from using the technology as their spend per acquired\/retargeted user decreases while the ROAS increases.<\/span><\/div> <!-- description --><\/div> <!-- aio-ibd-block --><\/div> <!-- aio-icon-box --><\/div> <!-- aio-icon-component -->[\/vc_column][\/vc_row]<\/p>\n\t\t\t\t\t\t<\/div><!-- .entry-content -->\n\t\t\t\t\t<\/div><!-- wp-show-posts-inner --><div class=\"wpsp-clear\"><\/div><\/article><\/section><!-- .wp-show-posts -->[\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/3&#8243;][vc_column_text][\/vc_column_text][\/vc_column][\/vc_row][\/vc_section]<\/p>\n","protected":false},"excerpt":{"rendered":"<p>[vc_row el_class=&#8221;front-hero-section&#8221;][vc_column width=&#8221;1\/2&#8243; css=&#8221;.vc_custom_1582730807176{background-image: url(https:\/\/persona.ly\/glossary\/\/wp-content\/uploads\/2020\/02\/group-19.svg?id=58) !important;background-position: center !important;background-repeat: no-repeat !important;background-size: contain !important;}&#8221; el_class=&#8221;hero-first-section&#8221;][vc_column_text el_class=&#8221;page-heading&#8221; css=&#8221;.vc_custom_1593096625729{margin-top: 30px !important;}&#8221;] UA Glossary [\/vc_column_text][vc_column_text][\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/2&#8243;][vc_single_image image=&#8221;60&#8243; img_size=&#8221;full&#8221; alignment=&#8221;center&#8221; el_class=&#8221;hero-section-image&#8221;][\/vc_column][\/vc_row][vc_section css=&#8221;.vc_custom_1583428025692{background-image: url(https:\/\/persona.ly\/glossary\/\/wp-content\/uploads\/2020\/03\/bg_repeater_with_bg_svg.svg?id=320) !important;}&#8221; el_class=&#8221;post-content-section archive-page-custom&#8221;][vc_row el_class=&#8221;covered-grace-font&#8221;][vc_column width=&#8221;2\/3&#8243; el_class=&#8221;gap-in-end&#8221;][vc_column_text][\/vc_column_text][vc_column_text][\/vc_column_text][\/vc_column][vc_column width=&#8221;1\/3&#8243;][vc_column_text][\/vc_column_text][\/vc_column][\/vc_row][\/vc_section]<\/p>\n","protected":false},"author":1,"featured_media":0,"parent":225,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v19.10 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Bid Shading - Making the Most of First-Price Auctions - The UA Glossary - Persona.ly<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/persona.ly\/glossary\/real-time-bidding\/bid-shading-making-the-most-of-first-price-auctions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Bid Shading - Making the Most of First-Price Auctions - The UA Glossary - Persona.ly\" \/>\n<meta property=\"og:description\" content=\"[vc_row el_class=&#8221;front-hero-section&#8221;][vc_column width=&#8221;1\/2&#8243; 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