What is CPM algorithm?
CPM algorithm is the Kayzen data science solution to run CPM optimized campaigns on RTB. It optimizes media cost (eCPM) by bidding minimum amount required to achieve desired win rate (desired win rate = 50% per current models).
How does the CPM optimization work?
CPM Bid Optimization optimizes bid values based on fluctuations in floor prices, competition, and request volume throughout the course of a day.
With CPM Bid Optimization ON, the model will try to achieve a win rate of 50% at or below the target CPM you have set, based on the fluctuations in floor prices.
With CPM Bid Optimization OFF, the campaign will respond with a bid value equal to your Target CPM for all eligible bid requests) (those matching targeting criteria).
§ CPM Bid Optimization OFF should only be used for highly targeted campaigns in which you know very well the price you're willing to pay for the inventory (i.e. whitelisting a single app, or targeting a small audience)
What is the Bid shading Model?
The Bid Shading algorithm estimates the minimum price required to win an ad auction and adjusts the bid price accordingly, resulting in significant cost savings. The advanced version of Bid Shading not only reduces bid prices and CPM but also minimizes the impact on key metrics like Installs and IPMs, ensuring enhanced cost efficiency.
Our Bid Shading solution is grounded on a model based approach with a custom loss-function. By learning from Wins and Losses, we can calculate a win-probability as a function of the Bid price. The model looks at multiple parameters and predicts the winning bid price for each request. The goal is to always predict a price which is as close as possible to the second highest bidding price thereby ensuring less drop in scale while maximising the cost savings.
You can read more about this in our release note.
💡 Note: Bid shading occurs after the max bid cap is applied.
In other words, the system first enforces the maximum bid cap, and only then applies bid shading on top of that value.