Use of First and Second Price Auctions in Digital Marketing Industry
The linked article discusses the implementation of second and first price auction models in the digital marketing industry, specifically discussing techniques by which ad space is sold to marketers by Ad Exchanges such as Google’s DoubleClick Ad Exchange. It discusses the pros and cons of each auction models, and it is important to note that the article is written by an individual involved in the digital marketing industry and published in an industry publication.
The implementation of second-price auctions is not as efficient in the digital marketing space as it would seem in theory, given the practice of “header bidding,” wherein ad publishers allow for multiple entities to bid on their inventory before awarding ad spaces, and wherein there is a final auction conducted when the header of a webpage is loaded in order to decide which ad is displayed on the page. Hence, the second highest price which is paid by the highest bidder may not end up being the highest price in the auction conducted upon page load, thus perverting incentives during the auction process, and resulting in individuals not in fact bidding their true value, but bidding higher than their true value in anticipation of the header bidding process. As a result, a major advantage of second-price bidding, the fact that each entity bids their true value and market value is discovered is invalidated.
Hence, first-price auctions are considered by those in the industry to be a better model for the digital marketing space, as it removes the need for bidders to anticipate the magnitude of the second-highest bid as well, increasing transparency and streamlining the bidding process in the face of technological changes such as header bidding.
https://www.digitaldoughnut.com/articles/2018/june/there-are-no-losers-at-first-price-auctions