Programmatic advertising is preparing for the first-price auction era
https://digiday.com/marketing/programmatic-advertising-readying-first-price-auction-era/
In this news article, the author argues that although second-price auctions have been the “underpinning of programmatic”, some programming advertising companies have started to experiment with first-price auctions because second-price auctions have been called out for lack of transparency.
The benefit of second-price auctions over first-price auctions is that the bidders know exactly that they should bid to achieve dominant strategy, and they are aware that if they win, what they actually pay at last can be much lower than what they bid. For first-price auctions, bidding doesn’t have an exact value that can achieve dominant strategy, and they know that if they win, they will pay exactly what they bid.
However, despite the benefit of second-price auctions, some sellers besmirched the people’s impression of second-price auctions. Because of the lack of transparency of online auction, it is possible that in second-price auctions, when a bidder wins the auction, the seller can bid a price slightly lower than what the winning bids, so the winner wins the auction and pays an amount just slightly lower than his true value. This practice eliminates the possibility that bidder could secure a position with a high bid but end up paying a much lower price and thus lead to people’s distrust in second-price auctions.
This cannot be done with first-price auctions because in first-price auctions people know how much money they are going to pay if they win. This certainly in price is an advantage of first-price auction and now since second-price auctions start to lose people’s trust, companies are starting to use first-price auctions.