An update on first price auctions for Google Ad Manager

We’ve heard from many of our partners that they want our help to simplify how they manage their revenue from advertising. That’s why Google Ad Manager will be transitioning to a unified, first price auction this year. This change will simplify our publisher platform and create a fair and transparent auction for everyone, helping our partners create sustainable businesses with advertising. Today, we’d like to share additional details as we prepare to transition to a first price auction.

Reducing complexity

Currently, Ad Manager may run two different auctions for a specific ad. A second price, real-time bidding auction run with Authorized Buyers — which includes Google Ads, Display & Video 360 and other Demand Side Platforms — followed by a first price auction that compares the winning price from the second price auction with a publisher’s guaranteed and non-guaranteed advertising campaigns, as well as bids from Exchange Bidding buyers. By switching to a unified first price auction, we can reduce this multi-stage process and provide all non-guaranteed advertising sources the same opportunity to win an auction.

After the transition, Ad Manager will have a single auction that compares the prices from a publisher’s guaranteed campaigns with all of a publisher’s non-guaranteed advertising sources — including real-time bidding partners (such as Authorized Buyers and Exchange Bidding partners) and non-guaranteed line items (including those that publishers use in their header bidding implementations). Going forward, no price from any of a publisher’s non-guaranteed advertising sources, including non-guaranteed line item prices, will be shared with another buyer before they bid in the auction. As has always been the case, all real-time bidding partners integrated with Ad Manager — including Google Ads and Display & Video 360 — will be notified of an auction at the same time.

Increasing transparency

Moving to a unified first price auction will allow us to provide additional auction transparency to both publishers and advertisers. Today, not all Authorized Buyers choose to share and receive bid data, resulting in gaps in historical auction data we can share with publishers and Authorized Buyers. When Ad Manager changes to a unified first price auction, we plan to require all Ad Manager partners to share and receive bid data. This change will allow us to provide publishers reporting on all bids submitted for their ads (including bids from Google Ads and Display & Video 360) and give all Authorized Buyers and Exchange Bidding buyers access to the price that was needed to win for auctions they submitted a bid to.

“Moving to a first price auction puts Google at parity with other exchanges and SSPs in the market, and will contribute to a much fairer transactional process across demand sources. The move also provides significantly greater information transparency to both advertisers looking to understand their working media dollars, and publishers looking to assess the fair market value of their supply.” 

- Scott Mulqueen, VP Programmatic and Data Product Operations, Trusted Media Brands

"Google’s move to first-price auctions and unified pricing is an opportunity to improve transparency throughout the ecosystem, including improved visibility of their own actions and practices, which I believe should benefit everyone.” 

- Richard Caccappolo, Chief Operating Officer, MailOnline

"Brands and agencies are demanding a scaled, open, and unified approach to the modern marketing platform. MediaMath supports Google's effort to simplify the programmatic supply chain and provide more transparency in the media buying and selling process. These updates should help reduce friction between advertisers, publishers, and the broader tech ecosystem."

- Jeremy Steinberg, Global Head of Ecosystem, MediaMath

How floor price strategy will change

Our shift to a unified, first price auction will require publishers to rethink how they use floor prices. In a second price auction, floor prices can be used to prevent advertisers from buying inventory below a specified price. But because of how second price auctions work — the highest bidder pays the second highest price — floor prices can also be used by publishers to increase the closing price of their auctions. This strategy is executed today when a publisher reviews their bid landscape data and compares it to their revenue reporting. If they notice that their auction closing prices (the auction second price) are significantly lower than their highest bids, oftentimes the publisher will raise their floor prices to increase their revenue in the short term. Over time, this behavior can erode trust in the benefits of a second price auction.

After transitioning to a first price auction, price floor strategies created to influence the second price auction closing will no longer be relevant. When approaching floor strategy, publishers should focus on understanding the true value of their inventory and adjust pricing based on their existing advertising deals and how buyers are valuing their inventory.  

How pricing rules will change

In addition to impacting how publishers are using floor price rules, changing to a first price auction in Ad Manager requires a change in how our rules function. Our existing price rules that only apply to our second price auction will no longer work in a first price auction.

That’s why we released a new feature to all publishers globally, called unified pricing rules. Our new unified pricing rules will help publishers more easily manage floor prices across all non-guaranteed partners. For example, instead of setting up the same floor prices in multiple places — in the auction in Ad Manager, and with their Exchange Bidding and other non-guaranteed advertising sources — which can take a lot of time and can lead to errors, a publisher can set up a single unified pricing rule to control pricing from one place. To maintain a fair and transparent auction, these rules will be applied to all partners equally, and cannot be set for individual buying platforms. We have set an initial limit of 100 rules, though as we roll out these changes we’ll be working with our partners to understand if this limit can support all use cases, or if a higher limit is necessary.

“We welcome Google's move to first price auctions and unified pricing rules. These changes will help us simplify how we implement our most advanced pricing strategies between our header bidding partners, Ad Manager and Exchange Bidders. We believe this will help create a level playing field for non-guaranteed transactions and help us review the performance of our demand partners.” 

- Alex Payne, VP of Global Programmatic Solutions, VICE Media

“We’ve built our technology to work with Ad Manager through Prebid and Exchange Bidding to help publishers monetize their inventory however they choose. We're glad to see Google shifting toward a more transparent and simplified approach to auctions, and we look forward to collaborating with them to ensure these changes are executed in a way that works for publishers and buyers alike.”  

- Tom Kershaw, Chief Technical Officer, Rubicon Project

The switch to unified pricing rules and a unified first price auction will help our partners simplify how they manage advertising revenue and increase transparency for everyone in the ecosystem. We understand these changes will impact how publishers operate their advertising businesses, so over the next few months our teams will be working with our partners to help them with this transition. We are excited to take this next step together.