2 min

How to Win in A First Price Auction with Walmart Ads

By Claire Lee, Meghna Bhalla on August 27, 2021

Keyword bidding is often one of the most stressful tasks for many advertisers and setting the optimal bid for strategic keywords can be the make or break factor of a successful campaign. To make things even more complicated, advertisers must also take into consideration a marketplace's auction dynamics.

What is a First Price Auction?

Marketplaces such as Instacart and Amazon use a second price auction, meaning that if you were to set a bid and win, you are paying only $0.01 more than the bid of your closest competitor. However, Walmart Sponsored Products uses a first bid auction model. This means that advertisers are bidding on keywords and items based on the maximum that they are willing to pay per click - the winner of the bid pays the exact value of their bid. In other words your bid equals your CPC.

With Walmart Ads, it is important to note that the minimum bid for Automatic campaigns is $0.20 and the minimum bid for Manual campaigns is $0.30. To ensure some sort of regulation in Walmart's first price auction, there is also a $20 max bid for both campaigns. This differs from Amazon Advertising which has a minimum bid of $0.01 and no maximum bid amount.

What is bid shading and how does it work?

With first price auctions, there is always a fear of overpaying. If you bid $5 for an impression and the next highest competing bid is $2.50, you will still end up paying $5 when strategically, a bid of $3 would yield the same results at a lower cost. As a result, once you determine the value of an impression, you need to adjust your bid downwards so that, if you win, you are only charged the minimum amount necessary to win the auction. However, on the other hand, bidding too low could increase your chances of losing the auction altogether. This causes a trade-off between the cost and the likelihood of winning the first priced auction. The process of making a final bid adjustment is called bid shading.

But you don't need to spend your precious time learning how to bid shade to be efficient in a first-priced auction. With Perpetua, our ad engine executes tactics such as bid shading automatically, so that you can always ensure you're being as efficient as possible with your ad spend, and focus on higher-level strategies and objectives instead.

To get started with Walmart Sponsored Products advertising, email us at [email protected]