Google has announced that it’s moving AdSense from a second-price auction model to a first-price auction model by the end of the year, which brings it in line with their other ad offerings and makes it easier for Google to compete with other exchanges. These changes will happen automatically, so publishers and marketers don’t need to take any action.
First-Price Versus Second-Price Auctions
In a second-price auction, the final price paid by the winner is determined by the amount of the second-highest bid. This gives the winner a chance to pay a little bit less than the bid they originally submitted. The winning bidder pays the price offered by the second-highest bidder plus $0.01. This is the model that has been used by Google AdSense up until now in online display advertising.
A first-price auction simply means the winning bidder pays the amount they bid. Instead of paying the second-highest bid, advertisers can expect to pay the full amount of their bid.
Simplifying Things for AdSense Buyers
Some other display advertising platforms have switched to first-price auctions including Google Ad Manager and Google Ad Mob. As AdSense moves to a first-price auction model, the process of buying online ads is simpler for advertisers. A single approach can be used to bid across AdSense, AdMob, and AdManager, which can create consistency and may make it easier to understand and easier to plan to spend.
AdSense for Shopping and AdSense for Search is not affected by this change. The products that are affected by this transition to a first-price auction model include AdSense for Video, AdSense for Content, and AdSense for Games.
Why Does This Change Matter?
Google has stated that they aren’t sure how this change will affect publishers. They did find that there was a neutral or slightly positive impact to publishers when the shift to first-price auctions was implemented in Ad Manager.
One thing to keep in mind is that the winning advertiser in a first-price auction may end up paying more than they would have in a second-price auction. The difference on a single bid may be pennies, but over the course of several weeks, it may add up.
The announcement of this change gives advertisers a chance to evaluate their budget and adjust their bidding strategy if needed. One advantage of this change is that a first-price auction model provides more clarity on overspending.
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