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What is Advertising Bidding and how does it work?

Monday, November 14, 2022

What is advertising bidding?

It’s an ad placement method where the publisher allows advertisers to bid against each other for impressions. This means that advertisers can get their ads on targeted websites for less than they would pay. Suppose they bought the ad space directly from the publisher. Websites use this technique, which accepts both traditional and programmatic ad placements.

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In a traditional ad placement, an advertiser can purchase the entire inventory of a particular publication/website and only pay for actual audience views. In this case, the publisher still gets paid even if no one clicks on the advertisement. But this isn’t the case with PPC (Pay per click). Publishers only make money if a user clicks on an ad, and it leads to a conversion. (sale or other action)

Important terms:

Inventory: This term refers to the space where advertising will be placed. Ad types that can be set include premium, native, and mobile.

Advertisers: The website's publisher sets a minimum bid for specific inventory before opening it up to advertisers. Once this time frame is over, the highest bidder shows their ad in that particular space.

Publishers: Publishers are the people who create content for a site, blog, or social media account.

How it works and how advertisers can manage their bids:

In a programmatic auction, advertisers generally have two options: Manual & automated!

  • In manual bidding, the advertiser will decide how much they will pay for every 1000 impressions. (Also called cost per mille or CPM.) This is usually helpful for advertisers with specific targeting criteria, especially if it’s an exact match. For example, if an advertiser only wants their ads to show up on sites with a particular audience. This is the way to go. But, if they are trying to get more attention for their ad and don’t care about the specific site or demographic. Automated bidding will be better for them.
  • Advertisers who use automated bidding can let the system decide how much they need to pay per impression. The system will look at many factors, including click-through rate (CTR), site content and context, device, audience demographics, and more. This information is put into an algorithm that automatically sets a maximum bid for the user.

The benefits this technique offers publishers/websites that run adverts on their site, like more revenue or access to better-quality ads:

  • With ad bidding, publishers/websites will get more revenue because they can sell ad space at higher prices than if they did not go with the programmatic route. This benefits publishers with a lot of inventory and may need to fill it up quickly.
  • Higher quality ads: Since advertisers are competing, the end goal will be to create ads that pull in more clicks and views.
  • ​This is beneficial for users who see better ads and only those they’re likely to engage with. In contrast, advertisers can reach their target audience without paying too much while ​receiving high CTR.
  • ​Typically, this is a win-win situation.

The downsides of ad bidding:

  • One drawback of this system is that advertisers might have to pay too much for impressions. This problem arises because the price an advertiser needs to pay depends on the maximum bid of the second-highest bidder. So, if they’re willing to pay up to $2 per 1,000 impressions, and the next bidder offers that much but no more, they’ll have to pay somewhere between that amount.
  • Another downside of ad bidding is that advertisers targeting a specific audience might get different matches with individual sites. This is because the algorithm considers many factors, not just the content of the particular site. So, suppose an advertiser wants to target females between 18 and 35 living in California. In that case, they might have to broaden their criteria so that the ad appears on sites with some female demographic and audience based in California.

How bidding on mobile ads is different from desktop advertising.


Since mobile ads are different than traditional display ads, it only makes sense that the bid options are also different. Like regular online ad campaigns, advertisers have two options for programmatic advertising on mobile devices: CPC or CPI (cost per install).

However, one thing unique about this type of advertising is that advertisers who choose CPI campaigns only pay when the app is successfully installed onto the user’s phone. On the other hand, CPC campaigns work like regular CPC advertising, where users only have to click on the ad to start getting charges from their advertisers.

The benefits of using mobile ads with automated bidding:

Since mobile devices are widely popular, many advertisers consider it an excellent way to get their brand in front of users while they’re on the go and gazing at apps. There are benefits for advertisers and publishers alike when using mobile ads because the ads can be highly targeted and specific. This leads to better ad performances and high conversions for advertisers while also pleasing users by not bombarding them with ads they aren’t interested in.


In summary, ad bidding is a programmatic advertising technique. That allows advertisers to set bids on the keywords or topics they want their ads to appear for. This results in them having to pay less. Because they’re only competing against other advertisers, who also have their ads associated with those specific keywords/topics.

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