The amount of money an advertiser is willing to pay for a click or impression in an auction-based advertising model.

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Advertising Glossary

What is a Bid In Advertising?

In an auction-based advertising model, advertisers compete to have their ads shown to users by placing bids on ad inventory. The bid is the maximum amount of money that an advertiser is willing to pay for a click or impression on their ad. Bids are typically placed in real-time, using algorithms that adjust bids based on factors such as the user's location, the time of day, and the device they are using.

The amount of the bid determines the likelihood that the advertiser's ad will be shown to the user. In general, the higher the bid, the more likely the ad will be shown. However, other factors also come into play, such as ad relevance and ad quality. Advertisers who have high-quality, relevant ads may be able to win ad inventory even if their bid is lower than that of their competitors.

Bids can be set at the campaign, ad group, or keyword level, depending on the advertising platform being used. Some platforms, such as Google Ads, use an auction-based system called a pay-per-click (PPC) model, where advertisers only pay when a user clicks on their ad. Other platforms, such as Facebook Ads, use a pay-per-impression (PPM) model, where advertisers pay for every 1,000 impressions their ad receives.

Effective bidding strategies are essential for maximizing the return on investment (ROI) of an advertising campaign. Advertisers must balance their bids with their advertising budget and the expected value of each click or impression. They must also continually monitor and adjust their bids based on the performance of their ads and the competition in the advertising marketplace.