VCG Advertising on Facebook vs. GSP Advertising on Google
Google and Facebook handle advertising in different ways. Google’s AdWords has advertisers bid for a spot on a particular results page when someone searches a keyword. Facebook’s advertising system, developed in part by John Hegeman (Facebook’s chief economist), is the Vickrey-Clarke-Groves auction (VCG). Before Facebook, VCG was essentially no more than an “academic exercise”. The idea behind using this auction system was to prevent advertisers from gaming the auction for their own monetary gain. In practice, modifications needed to be made by Facebook so that ads were ranked not only against others ads, but also against all of the other stuff on Facebook since Facebook ads appear alongside everything else on a Facebook news feed. VCG calculates price according to “how much value is lost from the rest of the system if the ad lands on the page”. An advertiser will win the spot if its ad is truly the most relevant to show to a given person at that time.
While Google’s Generalized Second Price (GSP) auction works for search, Facebook’s VCG auction works for areas beyond search because it cannot be gamed unless advertisers collude with one another in some way. While advertisers spend a lot of time trying to game Google’s auction system, they do not do the same with Facebook’s because of the idea of an un-gameable system.
https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/