Ep 8: First-price auctions and bid shading

A buyer values your ad at five dollars. It bids three twenty.

Bid shading means a buyer bids below its true value to avoid overpaying.

Ad Manager has run a unified first price auction since twenty nineteen. The winner pays what it bids. In the old second price auctions, the winner paid just above the runner up. Value five, next bid three, price about three dollars and one cent. In first price, an honest five dollar bid pays five. So buyer software learns what usually wins on your site, and bids just enough. If three twenty usually wins, it bids three twenty. What pushes shaded bids back up? More real competition, and floors close to what buyers really value.

Lower bids don’t always mean weaker demand. Check competition and floors before you panic.

Next, pricing rules after the Google ruling.