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First Price Auctions Back Up for Online Marketing Platforms

Recently, there has been a shift in online advertising and digital marketing techniques to promote first price auctions as opposed to second price auctions in online advertising systems. Previously, when the online market place began its compilation of auction data, first price auctions caused a lot of distress for both advertisers and ad platforms due to their ambiguous dominant strategy. Therefore, Google and Facebook, the biggest advertising platforms online, have tended to use strategies that represent second price auctions to minimize the chaos. These giants have also provided numerous extra services to advertisers like analytic and audience insight services to make ads more relevant and to urge advertisers to bid truthfully.

However, there is a new shift in the online market place that is becoming popular with other marketing platforms primarily due to advanced algorithm techniques and the new hybrid header bidding approach. With more services and advanced algorithm techniques, advertisers are now able to get their ads accessed by a more focused audience that is more likely to interact with the advertisement yielding higher profits to lower revenues for advertisers and decreasing CPM (Cost Per Impression). To receive exclusive access to these services, ad platforms are using first price auctions with more popular ad locations thus increasing the CPM to a new level.

Secondly, the use of header bidding is now allowing advertisers to alter their advertisement inventories in congruence with other advertising platforms before even making live ad calls. This allows more exchanges between competing advertisers and serves them with better marketing strategies under direct competition.

Since this mitigates advertisers revenues, a new system that uses bid sharing, where the price is determined somewhere between a first and a second price auction, is also becoming popular where calculating a dominant strategy is also somewhat hectic but more rewarding. Altered floor prices and other similar tactics are also used to hide price differences by ad platforms yielding a lot of turbulent change in the advertisement industry. Overall these bidding strategies are becoming more and more transparent with more advanced algorithm tools between parties and balancing out to maintain competition and mutual benefit to different parties.


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October 2018