Google’s Switch To First-Price Auctions
This article, published on September 6, 2019, depicts the consequences of Google’s recent decision to implement first-price auctions. Over the past few months, Google has been testing first-price auctions on 10% of its Google Ad Manager inventory. On September 10th, Google rolled out changes to finally implement first-price auctions. For context, approximately a year ago most independent ad exchanges switched from second-price to first-price auctions.
This change will help standardize bidding strategies. This standardization is welcomed by agencies since they can now apply their bidding strategies more easily across different auctions. This connects back to what we have learned in class since we learned that there are different strategies for first-price auctions versus second-price auctions. Specifically, in a first-price auction it is most strategic to bid below one’s value. In a second-price auction it is most strategic to bid at one’s value. Therefore, now agencies have to do less work to determine what they should bid in each auction, and can always bid below their value (assuming all auctions they partake in are first-price).