What is Bid Shading?

Quick definition

Bid shading is a DSP algorithm that lowers a bid below the buyer's maximum value in first-price auctions, estimating the lowest price likely to still win so advertisers do not overpay.

Key points

Why it exists: The industry moved from second-price to first-price auctions around 2017–2019, removing automatic price reduction.

Benefits

Saves buyer spend in first-price auctions

Trade-offs

Opaque; publishers see lower clearing prices

FAQ

Is bid shading the same as a floor?

No. Floors are set by sellers as a minimum price; bid shading is applied by buyers to their own bids.

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Official sources

IAB Tech Lab

Last reviewed 2026-10-27. Explanations are written by AdTech Radar; consult the official specification for implementation.

Find companies

Browse Directory companies working on Bid Shading.

Related terms

OpenRTB
OpenRTB is the IAB Tech Lab specification that standardizes how an exchange or SSP sends a bid request describing an impression to DSPs and how DSPs answer with a bid response, so thousands of buyers and sellers can trade in real time through one common JSON message format.
Header Bidding
Header bidding is a technique where a publisher offers each impression to multiple SSPs and exchanges simultaneously before calling its ad server, so demand competes on price at once instead of in a sequential waterfall.
CPM, eCPM & vCPM
CPM is the price paid per 1,000 ad impressions; eCPM normalizes revenue from any pricing model into a per-1,000-impression figure so different demand sources can be compared; vCPM counts only viewable impressions.