Google Adopting a First Price Auctions System
https://marketingland.com/google-shares-details-on-how-first-price-auctions-in-google-ad-manager-will-work-260830
Google Ad Manager is changing its current second-price auction pricing mechanism to a first-price system. A first price system would mean that instead of paying the price of the second-highest bid, bidders will now have to pay the price that they bid. The second-price system has been used successfully in the Programmatic Ad industry for years now but Google and a plethora of other Online advertisement companies have noticed that the industry is becoming more and more complex, making it harder for publishers and advertisers to properly price their spaces.
They currently run two different auctions, a second-price auction with authorized buyers and a first-price auction among non-guaranteed advertising campaigns. they use the price from the first-price auction to determine what the winner of the second-price auction will pay. It is a very confusing and complex system that to be completely honest, I don’t fully understand. Google sees the complexity of this method and the fact that Authorized buyers do not have to share data as an issue in its system. They have decided that the new system will require all bidders to be in a unified first-price auction with all bidders having the same opportunities. This will change bidding strategies drastically and google has allowed buyers about a year to work on their strategies. It will also allow Google to do better pricing analysis and give better pricing advice to bidders. This relates directly to the class discussion on auctions and the bidding systems. Here we see that the initial strategy of just bidding your value is no longer the dominant strategy. Now bidders must bid just a bit below what they value the ad spot as and with google forcing bidders to share information, they now know how many bidders will be present(N) and can use the “(N-1/N)*V” equation (where V is what they value the spot at) to find an adequate price below their value to make the most out of their bids.