Google Ad Manager to Offer First-Price Auctions, Simplifying Programmatic Buying

The industry's largest platform is offering more options to users

Google is not the first to offer first-price auction options via its ad exchange. Google
Headshot of Ronan Shields

First-price auctions are coming to Google Ad Manager in a move that is reflective of the industrywide cry for greater simplicity in the murky world of programmatic buying.

Google Ad Manager, the industry’s largest programmatic platform for publishers, which previously used the DoubleClick moniker, will offer publishers the option to sell their online media space using unified auction mechanics, including the opportunity to run first-price auctions, by the end of the year.

A first-price auction is where a bidder has to pay the actual price they offered in an ad auction, as opposed to a second-price ad auction whereby they only have to pay the amount bid by the nearest competitor, i.e., the second-highest offered in an auction.

In the early days of programmatic media trading, second-price auctions were the default means of monetizing remnant ad impressions. In December 2017, this was as high as 75 percent of impression share.

However, the dual trends of media buyers spending more and more of their budgets programmatically along with the growing complexity of the wider ad-tech ecosystem means that many buyers find it difficult to properly value such inventory.

This has been prompted by a myriad of opaque practices by middlemen, and as a result, a number of ad exchanges, such as Index Exchange, OpenX and Rubicon Project, have started to offer more straightforward auction mechanics.

In a blog post explaining the move, Sam Cox, group product manager, Google Ad Manager, said the current state of affairs has made it difficult for even experts to make sense of the marketplace.

“Today the programmatic ecosystem has evolved into a much more complex marketplace where a single ad can pass through a mix of over 10 different auctions with different rules before a winning bid price is selected and an ad is served,” said Cox.

“This complexity has made it difficult for advertisers and agencies to properly value programmatic inventory, and it has driven our publishers and app developers to implement increasingly complicated ad monetization strategies, reducing transparency across the industry.”

Google is now contacting its programmatic advertising partners, advising them of the measures necessary for transitioning to the unified auction type, which will mean that every offer from programmatic buyers will compete in the same unified auction alongside campaigns negotiated directly with a brand advertiser.

“An advertising buyer’s bid will not be shared with another buyer before the auction or be able to set the price for another buyer,” added Cox.

“The buyer that wins the auction pays the price they bid. By simplifying our auction in Ad Manager, we can help make it easier for publishers and app developers to manage and get fair value for their inventory,” he continued.

Cox went on to note how the move to a single unified first-price auction will only impact inventory sold via Ad Manager and will have no impact on auctions for ads on other Google properties such as Search, AdSense for Search or YouTube and other Google properties.

Speaking with Adweek, Ari Paparo, CEO of Beeswax, a buy-side programmatic platform, said the move would be widely welcomed even if its introduction was a little past due.

“Since header bidding came out a couple of years ago, there has been a slow, steady move toward first-price auctions,” he said. “AdEx [a commonly used name for DoubleClick Ad Exchange] was the big holdout that was sticking to second-price auctions, and this is going to make things a lot simpler in the industry.”

Also speaking with Adweek, Lauren Fisher, principal analyst at eMarketer, noted how the overall shift to first-price auctions is reflective of the overall importance of programmatic as a monetization option for publishers.

She further went on to note how the shift to first-price auctions has posed a challenge for some of the industry’s demand-side platforms as it required them to recalibrate their bidding algorithms.

“You no longer can bet on throwing a high ball offer out there and feel comfortable that you’re going to win the second price,” she said. “Whatever you put out there is potentially what you’re on the hook to pay for.

Meanwhile, Wayne Blodwell, CEO of The Programmatic Advisory, said the introduction would likely result in a short-term hike in prices from media owners.

“I expect there will be some frustrated publishers who dislike this mandate as they are unable to control how their inventory is monetized via a mix of auction approaches for different ad slots, but this update does take away that complexity,” he added.

@ronan_shields Ronan Shields is a programmatic reporter at Adweek, focusing on ad-tech.