Google Switches AdSense to First-Price Auction
Up until now, Google has been using a second-price auction format for its Adsense for Content, Video, and Gaming. They did this for media buyers looking to bid on ad inventory. Second-price auctions have been the most widespread model in digital advertising, as they ensure advertisers the confidence to bid their best value without having to overpay. Specifically, advertisers had to pay $0.01 more than the second highest bid. Recently though, Google announced that it will switch its Adsense auction to first-price by the end of 2021, mostly in efforts to align its formatting in other ad-selling platforms like Ad Manager and Ad Mob. It claims the switch makes it easier and more transparent for buyers to buy ad space because they will just pay their bid price. No action is needed on the creators’ side as changes would happen automatically.
This obviously relates to our course’s units on auctions, specifically the difference between first-price and second-price. I found it very intriguing to 1) learn that Google Adsense has been using second-price and 2) see these various auction formats applied, as we mostly cover the hypotheticals. In their initial second-price format, Google thought the dominant strategy for advertisers to bid on their true value would be beneficial for the process. However, the gap between the highest and second highest bids could potentially be very large, leaving others to take advantage. Tech companies would often take some of the leftovers, or it could be used to subsidize another auction. Thus, to fix this issue, Google hopes to increase transparency with the switch to first-price auctions.
Source: https://www.adexchanger.com/publishers/google-switches-adsense-to-a-first-price-auction/