Home Ad Exchange News Google’s First-Price Auction Switch Is Making Header Bidding Partners Win More

Google’s First-Price Auction Switch Is Making Header Bidding Partners Win More

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When Google Ad Manager tested the switch to unified first-price auctions this summer, it saw a handful of ad tech players start to win a greater share of ad impressions.

“First-price auctions have created a more competitive market,” director of product management Jason Bigler wrote in a blog post Thursday. DSPs, non-AdWords ad networks and header bidding partners using indirect line items collectively saw a rise in impressions won, he added.

Google buyers did not see a significant change in impressions won.

Google will fully switch to a unified first-price auction in the coming weeks after announcing the change in March. The exchange began testing the change on 1% of traffic in June and expanded the test to 10% of traffic in August.

The increase in competition has been expected by publishers and ad exchanges that have long pointed out ways Google Ad Manager ran an un-unified, and therefore unfair, auction.

In the previous second-price auction model, Google reserved a “last look” advantage that allowed it to bid last after everyone had already submitted their bids. It could win impressions for a penny more than the highest bidder, allowing it to cherry-pick valuable users and clear more impressions than its competitors.

Since a first-price auction requires everyone to state their bid upfront, Google had to lose its last look advantage when it made the product change. Google declined to share how much its impression share dropped.

Google’s motions to dismantle the advantages it created for itself have been years in the making.

To bring more competition into programmatic auctions, publishers started adopting header bidding four years ago, which undermined Google’s ad server advantage. In response, Google developed its own version of header bidding, known as exchange bidding (recently renamed to open bidding). The new product let outside exchanges compete alongside Google’s exchange.

But Google still held the last look advantage, until Google Ad Manager became the last major exchange to move to a first-price auction in March – amid mounting pressure from antitrust investigations and two weeks after the Federal Trade Commission assembled a 13-attorney task force to investigate anticompetitive conduct in US technology markets, including online advertising.

Publishers won’t see a big revenue impact

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Google also assured publishers that its early tests on 10% of inventory showed a neutral to positive revenue impact.

That finding is important, because first-price auctions can encourage buyers to submit lowball bids to save money, a practice known as bid shading. Aggressive bid shading could hurt publishers. Most bid shading algorithms yield a 20% savings for buyers – meaning publishers could see an equal decline.

As buyers adjust how they bid shade and publishers manage their floors, or the minimum price they will accept, the revenue impact could change. However, Google said it expected a neutral-to-positive long-term impact from the switch.

More data transparency

As Google moves to a first-price auction model, it said it will enter a beta on the next phase of its transparency push. Publishers and buyers will both gain access to new data to make them smarter about programmatic auctions.

Publishers will be able to see the number of bidders in an auction and the price range in which they bid. They can also look at the bid landscape by ad unit and the DSP or advertiser purchasing the inventory. But they can’t use the data to figure out what individual users might be the most valuable to advertisers.

Buyers and exchanges will be able to see the minimum bid price needed to win an auction after it closes, allowing them to tweak their buying strategies and improve their win rate.

Google also said that it increased the number of pricing rules a publisher could use to manage its inventory, after publishers pushed back over low early limits. Google upped the limit to 200 from 100, and allowed additional publishers exceptions to run with higher limits.

Updated to reflect that the changed limit was for pricing rules.

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