A bid in advertising refers to the maximum amount you're willing to pay for a specific action—usually a click (CPC), 1,000 impressions (CPM), or conversion—when competing for ad placement. In programmatic advertising, your bid determines if your ad is shown, where it’s placed, and how much it costs when someone engages with it.

Unlike traditional media buying, where rates are fixed, digital ads are purchased via real-time auctions that happen in milliseconds behind the scenes—every time someone opens a webpage, app, or CTV screen.

Understanding the Advertising Bidding Process

Here’s how the bidding process works:

1. You set a bid—the highest amount you’re willing to pay for a desired outcome (like a click or conversion).

2. The ad platform (e.g., Google Ads, DSPs) matches your bid with other advertisers targeting the same audience or placement.

3. An auction takes place in real-time.

   • Your ad rank (often calculated as Bid × Quality Score or Relevance Score) determines your position.

   • Even if you don’t have the highest bid, a strong ad or landing page can improve your rank and reduce your actual cost.

4. The winner’s ad is served, and the cost is typically just enough to beat the next-best bidder, not your full max bid.