Skip to main content



First Price Auctions for Online Advertisements

Auctions aren’t just for physical items. In fact, nowadays, nothing is physical about one of the main ways in which we can get involved in an auction. In a bid for the best online advertising space for the lowest possible cost, individuals, small and medium-sized enterprises and even large multinationals compete in Google, Bing, and Apple’s ad markets. And in many cases, these bids don’t involve humans: it’s programs bidding against programs. Google, for example, explains that it “determines which ads should show with a lightning-fast ad auction”. The auctions are ran “billions of times each month”.

Recently, Google made headlines by announcing that it would switch its bidding platform to a first price In a first price sealed-bid auction, the bidders do not know what value others have bid, and the highest bidder wins the item and pays the value she has bid. Previously, Google used to be one of the last auction platforms where they employed a second-price auction — where the top bidder pays the second-highest bid. Google mentioned the reason for the switch as a move to make the bidding process more transparent to bidders and publishers. Formerly, because it was not clear how much each bidder would be paying, there used to be numerous programs using complex algorithms to estimate what would be the optimal price to bid. However, with the switch, because it is not dominant for a bidder to bid his true price, every bidder would bid less than what they would be willing to pay, and actually pay that amount, as opposed to an arbitrary amount that is the second bid.

 

https://support.google.com/google-ads/answer/6366577?hl=en

https://www.wordstream.com/articles/what-is-google-adwords

Comments

Leave a Reply

Blogging Calendar

October 2019
M T W T F S S
 123456
78910111213
14151617181920
21222324252627
28293031  

Archives