{"id":99,"date":"2022-08-11T10:45:36","date_gmt":"2022-08-11T10:45:36","guid":{"rendered":"https:\/\/persona.ly\/glossary\/real-time-bidding\/bid-shading-making-the-most-of-first-price-auctions\/"},"modified":"2022-08-15T08:37:11","modified_gmt":"2022-08-15T08:37:11","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 – Making the Most of First-Price Auctions"},"content":{"rendered":"\n

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.<\/p>\n\n\n\n

Industrial Shift to First-Price Auctions<\/h2>\n\n\n\n

In RTB<\/a> (Real-Time Bidding), multiple 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’s ad revenue (and, obviously, their share of it).\u00a0
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.
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.<\/p>\n\n\n