Media buyers are incurring a hefty cost due to bid shading, a practice offered by publishers as an alternative to first-price auctions. A recent AI adtech study by Cognitiv found that 70% of buyers are paying an extra fee, amounting to $6.6 billion in wasted expenditure. The survey also found that 75% of digital media buyers believe the shift to first-price auctions favour publishers, and 64% say that this results in higher CPMs for them.
Many buyers don't even know what bid shading is, and of those that do, there's a lack of agreement on what it does. 33% of those surveyed think it's a tool to adjust their bids for a first-price auction, 32% think it's an algorithm that optimises their win-rate and CPM, 22% believe it's a tool to manipulate their bid so they pay less, and 12% state it simply adds another fee to their bid.
Aaron Andalman, co-founder and Chief Science Officer at Cognitiv, said: “Advertisers need a permanent solution, one that is designed for advertisers by media buyers, not a solution that publishers offered as a stop-gap solution to keep advertisers placated.”
To keep costs down, advertisers need to stay on top of the digital ad supply chain and track key metrics such as cost per mille (CPM). Businesses should also ensure they have a thorough understanding of bid shading and the implications of first-price auctions to ensure they are not overpaying for advertising services.
Originally reported by Martech: https://martech.org/bid-shading-costing-advertisers-6-6-billion-yearly/
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