Advertising secondary bidding strategy in online shopping sites.
Zagare, M. (2021, August 18). Amazon ad bidding strategies every seller should know. PPC Entourage. Retrieved October 31, 2022, from https://ppcentourage.com/blog/amazon-ad-bidding-strategies/#:~:text=Amazon%20follows%20Second%2DPrice%20Auction,bids%20at%20the%20target%20level.
Mullery, S. (2022, June 3). Walmart connect moving to advanced second-price auction. Tinuiti. Retrieved October 31, 2022, from https://tinuiti.com/blog/walmart/walmart-second-price-auction/
These two articles point to a new strategy of second prices bidding advertising on Amazon’s and Walmart’s websites. And they point out some of the differences between similar auction processes at Amazon and Walmart, respectively, and how best to win an auction.
In recent years, more and more websites have adopted secondary prices bidding strategy for advertising auctions. That includes Amazon and Walmart. secondary price bidding is when the highest bidder in an auction will pay one cent higher than the second highest bidder. That is, the winner of the auction (the highest bidder) does not have to pay his own bid, but only the bid of the second highest bidder. First, it can guarantee advertisers more confidence to bid, because they can never pay more than they bid and they can always control their budget. At the same time, it reduces the risk faced by advertisers, which can encourage them to participate in the auction more actively.
Both Amazon’s and Walmart’s auctions use second-price auctions, though there are some subtle differences. Amazon’s feature allows auctioneers to dynamically adjust their bids, using references from others’ bids to determine their own. The specific model is that Amazon can make a suggested bid to the auctioneer. This allows auctioneers to see what their competitors are paying and adjust their own fees for reference. The suggested bid range is based on bids similar to theirs that have won Impressions over the last 7 days. In other words, Amazon has access to the relevant data and can adjust the bidders’ bids, including adjusting the bids upward and allowing Amazon to adjust the bids downward. Dynamic Bidding is a campaign optimization setting designed to help improve a seller’s campaign performance automatically. In part, it can help auctioneers reduce the amount they have to pay or win auctions more easily.
But it’s worth noting that Amazon’s system is based on other people’s bidding behavior. The expected value and profit of the same advertising space are different for each person. In other words, if you blindly refer to other people’s bids, you may even lose money: The suggested bid may be very high, and may even be higher than your budget and result in a loss. Dynamic bidding has a similar problem. Your bid may be adjusted higher by Amazon to help you win the auction, but your profit may even be reduced or negative. Therefore, it is more important for bidders using Amazon to think carefully about their expected value and look objectively at Amazon’s recommendations to help them get the most out of it.
With the Walmart model, they take into account not only the amount of money offered, but also the relevance of the item to a given search. If your item is more relevant to a given search, you’re likely to pay a lower price to win the auction — underscoring Walmart’s emphasis on relevance. This further eliminates participants’ fear of paying more, and advertising costs can be further reduced.
To sum up, we know that while many platforms use second-price auctions, the model varies from platform to platform. Therefore, if you want to win an auction, simply increasing your bid is not the best strategy. It may even blow up your budget and turn your profit negative. Therefore, advertisers should think about their own budget and the expected value of the AD, and not take Amazon’s suggestion, but make a bid based on their own circumstances. For ads that are auctioned on Walmart’s platform, finding spots that are more relevant to your product is a better strategy to win an auction.
The reality is not as simple as the economic model, requiring auction participants to consider more factors.