{"id":14547,"date":"2019-07-02T10:32:44","date_gmt":"2019-07-02T08:32:44","guid":{"rendered":"https:\/\/yieldbird.com\/?p=14547"},"modified":"2024-07-22T19:27:14","modified_gmt":"2024-07-22T17:27:14","slug":"first-price-vs-second-price-auction","status":"publish","type":"post","link":"https:\/\/yieldbird.com\/research-hub\/first-price-vs-second-price-auction\/","title":{"rendered":"First-Price vs. Second-Price Auction – What Are the Main Differences?"},"content":{"rendered":"\n

The First-Price auction<\/strong>, which will be implemented on the Google Ad Manager level by the end of July 2019, differs a lot from a well-known in the programmatic market Second-Price<\/strong> model. The main difference between these two types lies in a model of determining the final price paid by the buyer. Despite the fact that the bid was the same in both cases.

So far both these models have been used simultaneously. Second-Price<\/em> by Google, and the First-Price<\/em> by most of the other large SSPs. In effect, the market was a little mixed. However, it won\u2019t last long<\/a>.<\/p>\n\n\n\n

Many market participants have difficulty with understanding what exactly will change after Google\u2019s move to Unified Pricing Rules<\/a>, and what will be the exact impact. To get that properly, you have to begin with the fundamentals of these auction types.<\/p>\n\n\n\n

Second-Price Auction<\/h2>\n\n\n\n


In this auctioning model, bidders set the price which they are willing to pay for an impression. However, the price they bid rarely is the exact amount they pay, as the winning bidder pays only 0.01$ more than the second-highest bid. Let\u2019s explain this on real numbers.

There are 3 bidders:<\/p>\n\n\n\n

  1. Bids 2.10$<\/li>
  2. Bids 2.80$<\/li>
  3. Bids 2.50$<\/li><\/ol>\n\n\n\n

    The highest bid in this auction amounts to 2.80$. But the price paid will be 2.51$. <\/p>\n\n\n\n

    \"First<\/figure>\n\n\n\n

    A Second-Price auction<\/em>, despite its scale, is considered by many to not be the best solution for programmatic. <\/p>\n\n\n\n

    For years, modified Second-Price auctions were the industry standard and the mass-adopted norm, despite their inherent lack of transparency and revenue-reducing constraints. The only way to achieve a truly fair, unified auction was by shifting to first-price, which is exactly what independent ad exchanges (Index included) began to do a few years\u2019 back. Slowly but surely, this shift brought greater fairness to the market, boosting buyers\u2019 win rates and publishers\u2019 revenue opportunities along the way<\/i>. The Drum<\/a><\/p>\n\n\n\n

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