How is digital advertising space priced?
For a long time, I had been wondering many things about the way advertising works on the internet:
Who decides which ads are placed on the internet and on different platforms? Who decides the order in which ads are positioned? How much do advertisers pay the publisher? How does the relationship between the positioning of the ad and the price of the same work?
Those are just a few examples of the generally not so well known digital marketplace that enables advertisers and publishers to buy and sell advertising space.
Digging through the internet, I came to realize that real-time auctions are the primary method under which this digital market operates.
This marketplace allows both the advertiser(buyer) to easily bid to buy across different sites of publishers(buyers).
Usually, these auctions are first-price auctions, since, for a given advertising space, the highest bidder will pay the value of its bid. However, as we can see in the source at the bottom of the comment, Walmart has recently decided to implement second-price auctions in the digital marketplace. The objective of this implementation is to give advertisers enough confidence to bid the best they can (usually their valuation for the advertising space), with a reduced risk of overpaying.
This implementation does not only help advertisers (buyers) but also Walmart (seller) since reducing the risk of buyers widens up the number of buyers that will enter the auctions.
The way this second price auction will work is the following: The price at which the winner of the auction will buy the advertising space will be based on comparing bids, which will usually be less than the bid that made him win.
Source: https://skai.io/blog/walmart-connects-second-price-auction/