For 22 years, I have worked on the buy side – across agencies, brands and now at their intersection – helping buyers navigate ad tech and helping ad tech understand buyers.
This past year, I have found a clear common cause: Buyers are exhausted. They spend too much time tracking changes, managing campaign and budget risk and reverse-engineering charges. Now, this frustration is becoming an operating cost that takes time away from performance.
That burden should not sit with buyers. Platforms built the systems, and only platforms can fully explain how they set the price.
Amazon’s auction black box
The ad industry’s latest dustup over auction transparency was kicked off by the Federal Trade Commission announcing a new lawsuit against Amazon last week.
The FTC’s complaint alleges that Amazon told retail-marketplace advertisers they were bidding in second-price auctions, where the winner pays one cent more than the next-highest bid. The FTC says Amazon instead charged advertisers nearly their full bid 80% of the time, extracting more than $20 billion since 2019. Amazon disputes that it misled advertisers.
The case covers only Sponsored Products, Sponsored Brands and Display – not Prime Video, CTV, streaming audio or other Amazon DSP inventory.
But, in the spirit of Amazon’s self-proclaimed “customer-obsessed” mission, I felt its entire ads business deserved an evaluation of its auction definitions: Are Amazon’s auction terms consistent and clear across buyer touch points, from marketing to sales to UI and training?
The programmatic side of the business
Whenever you’re digging into the terminology behind programmatic auctions, it’s important to note that a label can mislead by omission as readily as by commission.
I started my examination of how Amazon says its auctions work with the DSP side, the part of Amazon’s ad business the FTC complaint doesn’t address at all.
Amazon’s public materials offer two different descriptions of Private Auction pricing. Amazon’s generic guide to private marketplace deals states that private auctions “work on a second price auction where the highest bidder wins the impression but pays a penny more than the second highest bid.” But Amazon DSP’s help documentation describes its invitation-only Private Auction product, including Prime Video inventory, as having a floor price and clearing at a “variable CPM based on optimization.”
I reviewed Amazon DSP’s Private Auction training webinar and found no buyer-visible floor amount for a particular deal, clearing formula or explanation of which description governs the price Amazon charges.
So does Amazon DSP use the second-price rule in its general marketplace guidance, or does Prime Video use a different auction mechanism? I do not know. That may not be illegal, but it is material. A buyer should be able to determine how an auction sets its price. Based on the marketing materials, the UI and training I reviewed, the answer is not available.
I am not alleging that Amazon DSP engaged in the conduct the FTC says occurred in Amazon’s retail-search business. But the lack of clarity in its various different auction rules is revealing.
Amazon categorizes Prime Video as first-party supply. For third-party publisher inventory, Amazon Publisher Services states a specific rule. Its marketplace uses “a unified, first-price auction in which the highest bid always wins.” Amazon can clearly disclose auction mechanics when selling third-party supply. It does not appear to offer the same clarity for its own Prime Video inventory.
Auction labels don’t explain how advertisers are charged
An auction generally requires three things: competing bids, an allocation or winner-selection process and a payment rule.
What does “auction” mean to one of the estimated 500,000 SMBs identified in the FTC complaint as affected while buying Sponsored Products? If the answer is unclear for small advertisers, it may be unclear even for highly trained media buyers.
But the more important question is why any of this is so difficult to understand in the first place.
Across Amazon’s advertising business, buyers encounter the same category of auction described four different ways: “second price,” a “unified, first-price auction,” “dynamic” and a “variable CPM based on optimization” – the latter two describing the exact same Private Auction product across two different Amazon materials.
Meanwhile, naming the auction type is not the same as explaining the pricing mechanics.
And Amazon’s own applied economists have published research that speaks directly to the problem at the heart of the FTC’s complaint. Amazon Ads researchers found that “soft floors” can increase the platform’s revenue even when every bidder is otherwise identical. If the bidders are identical, is there really a difference in bidder value, targeting quality or willingness to pay that would explain the additional revenue? Or does it come down to the auction design itself, specifically, how the soft floor shapes the price ultimately paid?
The same research states that “payment rules are only partially specified” in auctions like these. That’s not a claim about any specific Amazon product; it’s Amazon’s own research treating partial payment-rule visibility as a recognized feature of online advertising auctions.
The Media Rating Council’s Digital Advertising Auction Transparency Standards are useful because they make the buyer’s basic questions explicit: What auction type is this? Is there a reserve price? When is it disclosed? How does the stated rule translate into the advertiser’s actual charge?
But “dynamic” – the word doing much of the work in Amazon’s own Private Auction language – is not among the terms the standard defines. The standards are a meaningful step forward, but their value depends on whether platforms adopt them.
Where this leaves media teams and platforms
Ask your DSP, in writing, what auction methodology actually applies to the inventory you’re buying and whether you can see the logs that would let you verify it. If the answer comes back vague or doesn’t come in writing at all, that’s not nothing.
For any DSP actually running a clean, disclosed auction: Lead with it. Put it in your marketing, your onboarding materials, your UI. The more educated buyers become across every stage of this cycle, the more a competitor’s silence on these same questions starts to look conspicuous.
What Amazon’s lawsuit should do is put every platform’s auction mechanics under the same lens, starting with Amazon’s own DSP side, so buyers aren’t left guessing at what “auction” even means.
Where the money moves when trust erodes
Buyers have to protect themselves by routing around what they cannot verify or understand. That means shifting spend toward direct, PMP and PG deals tied to specific deal IDs, especially as newer open protocols make direct brand-agency-publisher relationships easier to manage.
That shift is already underway, and it will pressure the revenue models of companies that rely on opaque mechanics to extract margin. I am backing advertisers as they find more effective, accountable ways to reach the consumers everyone in this ecosystem ultimately serves.
“Data-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.
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