How is First Price & Second Price Auction Different?

 

A small percentage (3% or less) of Ad Exchange traffic continues to be governed by the second-price auction model for a short time in order to monitor performance.

How is First Price & Second Price Auction Different?

Second Price

Bidder 1: $1.00

Bidder 2: $2.00

Bidder 2 wins but pays $1.01

 

In the 2nd price auction, floors are needed to extract value from high bids in the short term.

When the floor is below the 2nd price there is no effect. (CPM = 2nd price)

2nd price auction, when the Unified floor is above the 1st price, revenue is impacted. (CPM = $0)

First  Price

Bidder 1: $1.00

Bidder 2: $2.00

Bidder 2 wins and pays $2.0

When the floor is above the 1st price revenue is impacted. (CPM = $0)

Same as 2nd price auction, when the Unified floor is above the 1st price, revenue is impacted. (CPM = $0)

Winners pay exactly what they bid, and there’s no Auction Discount

Simple Indirect Auction

• With a single layer, 2nd Price Auction works efficiently.

• Buyers bid the maximum they are willing to pay, knowing that impressions will clear just above the second highest bid

Ever-increasing complex ecosystem

• Header bidding

• Exchange bidding

Buyers throttling queries (that could be high value) to maintain QPS (queries per second) load.

Typically all DSP and RTB buyers will go through a comprehensive testing phase, where an optimal volume or QPS threshold is agreed by both parties. Normally the higher the volume of requests sent, the higher the buyer latency will be. 

After the agreed QPS threshold is agreed, throttling will take place on the advertising exchange side. For example should a DSP not be able to return valid (200) responses the advertising exchange can throttle volume.

Strong bids losing to weaker bids due to mix of 1st and 2nd price auctions.

Highest: $6; Winning $4; Paid $3

Floors preventing highest bid from winning.

Highest: $7; Winning $4; Paid $3

Setting UPR Rules | What Changed?

1. Priority Levels no longer apply

2.  Instead, rules with higher price applies.

The Anonymous block is gone

Open Price Auction Rules

Preview of Affected Line Items

Unified Pricing Rules

Preview of Affected Line Items

Watch out for False Signals

AdX Coverage - % of bids won from all the impressions where DA participated. Therefore, there are impressions that they did not bid which are not factored in this %. 

Creating UPR Rules:

• RUN REPORTS - coverage MTD

• Run a historial per ad unit  report comparing day to day performance

1. Total Metrics:  Total Rev, Imp, Ave eCPM

2. AdX Metrics:  AdX Rev, Imp, Ave eCPM, AdX Impressions %

• Run a historical ad unit  line item report to benchmark % going to each LI type

1. Total Metrics:  Total Rev, Imp, Ave eCPM

• From the exported raw data, create the following reports 

• Ad unit DFP and AdX Performance Report by Day

• Ad Unit Line Item Type Report by Day

• Ad Unit Line Item Type eCPM by Day

• Ad Unit Rev & Imp SOV %

• Choose between a hard floor or a target CPM 

• Target CPM can earn you more revenue over time by adjusting floor prices to match more bids. Floor prices on individual bid requests can be either higher or lower than the target CPM you indicate. Average CPM for your inventory, however, is equal to or higher than the target CPM.

• For Flex Rules ad units, Summer series suggested a hard floor per size instead of target CPM, this is something you can explore

Reference Material for UPR

https://support.google.com/admanager/answer/9298008?hl=en

Unified Pricing Rules apply across all indirect demand

The more granular, the higher the floor

Setting floor too high could lead to unfilled impressions

Line Item Troubleshooter: New Rejection Reason - “Below Pricing Rule floor”

https://headerbidding.co/google-unified-pricing-rules-upr/