Google’s first-price auction impressions
Google announced that they would standardize first-price auctions on inventory through Google Ad Manager by the second week of September. After experimenting with first-price auctions on 10% of their inventory, Google finally decided to make the transition that most of the ad tech market had already made. Since the announcement, CPM, or cost-per-thousand impressions or views on Google, have shot up by between 9% to as much as 50%. Although these price fluctuations might just be a product of a large transition, ad buyers are already used to first-price auctions in the rest of the market, and the overall CPM should be higher than it was before. Google still has second-price auctions for 3% of its inventory to sort of gauge any differences between the two methods, but it seems that Google has made the transition for good to first-price auctions. This is a significant shift in the digital ad market because of how big of a player Google is, and if it hasn’t already been the standard, it’s certain that now first-price auctions are the standard for selling digital ads.
This news story is very relevant to our class discussion on auctions. In fact, we even discussed auctions as the method that Google and other ad vendors use to generate revenue, so the fact that this is just happening is very coincidental. As we discussed, first price auctions are where the highest bidder pays whatever he bids, whereas second price auctions are where the highest bidder pays the second highest bid. Both are very different, particularly because second price auctions encourage bidders to bid their true value because they don’t necessarily have to pay it. With first price auctions, bidders pay whatever they bid, which should shakeup their decision-making. Such a move also fosters transparency and efficiency in the auction and levels the playing field.