When it comes to auction dynamics, the programmatic landscape is changing.
In March 2019, Google announced that it will transition its ad exchange’s auction model from a second price auction to a first price auction. While this is a major announcement from one of the most consequential players in the programmatic ecosystem, let’s make sure we understand the difference between first and second price auctions, and what this change means. Auction breakdown:
Second price auction
The winning bid is determined by the highest bidder, but the winner only actually pays $0.01 more than the second highest bid.
First price auction
The winning bid is determined by the highest bidder, and the winner actually pays a price equal to that winning bid.
This transition from a second price to a first price auction is not completely surprising as many independent supply side partners (SSPs) have already transitioned to a first price model.
dataxu algorithms were designed to respond to marketplace changes
Google’s announcement may seem like a dramatic change that will cause significant impact, but there is no cause for concern for dataxu customers. dataxu’s team of data scientists have dedicated significant time and effort to addressing auction-related issues – especially during times of industry change. In fact, our multiple layers of sophisticated decisioning shield customers from any potential negative impact due to evolving auction mechanics.
dataxu’s promise: First Price Protection
Experience: Multiple supply partners, including Index Exchange, AppNexus and Rubicon have already made the shift from second price to first price. We have learned from these changes and have enhanced our algorithms with even more advanced methodologies to address first price auctions and ensure customers don’t overpay on Google or other first price auction inventory.
Dedication: From the get-go, dataxu’s algorithms have been designed to secure the most valuable inventory at the lowest price without overpaying. Due to this inherit design, customers have been shielded from negative effects of first price auctions.
First Price Protection: Our latest game theory based algorithms identify first price auctions vs. second price auctions prior to bidding to ensure you don’t overpay on inventory. Really, these algorithm enhancements reduce bids without reducing the probability of winning which means customers never miss out on impressions due to auction restrictions. This predictive environment has saved dataxu customers up to 65% of media costs on first price auction inventory. Not to mention, dataxu customers keep 100% of cost savings.
While the shift to first price auctions is a major industry change, it’s not for dataxu. We have been monitoring and proactively addressing auction dynamics since independent SSPs began transitioning to a first price model in 2017. We’re dedicated to minimizing the impact of this change and will continue to invest in innovative solutions that help our customers maximize scale and save money.