Google AdSense moves to a first-price auction model

First-price vs. second-price auctions. In a second-price auction, the final price paid by the winner is determined by the second-highest bid. In a first-price auction, the final price is the same as the winning bid.

This will simplify things for advertisers, Google says. “We are aligning our AdSense process with other ad selling platforms in the display advertising ecosystem, which we think will simplify the experience for buyers who can now use a single approach to bidding across AdSense, Ad Manager and AdMob, and improve advertiser spending confidence,” a Google spokesperson told Search Engine Land.

Which AdSense products are affected. The transition to a first-price auction only affects AdSense for Content, AdSense for Video and AdSense for Games. It does not affect AdSense for Search or AdSense for Shopping.

Why we care. Transitioning to a first-price auction aligns AdSense with Ad Manager and AdMob, both of which are already operating under that model. Making the winning bid the actual price advertisers pay may make it easier for some advertisers to plan their spending.

However, a first-price auction means that the final price the winning advertiser pays will be higher than it was under a second-price model if advertisers bid the same amount. “When buyers lower their bids in the context of a first-price auction, the effective payments tend to be similar in both models, reflecting the value of the publisher’s ad space and audience,” a Google spokesperson said, “We announced our change to first-price auction in advance to give our advertising partners the opportunity to adjust their bidding strategy before the auction goes live.” Campaign managers should inform stakeholders of this change as it may affect their strategy and/or budget.

Google also said that publishers will likely not see a change in their earnings as a result of this transition: “Due to the dynamic auction environment, we cannot predict how specific AdSense publishers will be impacted. But, on average we expect the impact to AdSense publishers’ earnings overall from the move to a first-price auction to be neutral. When Ad Manager moved to a first-price auction, there was a neutral to slightly positive impact to publisher earnings on average,” the company said.