The move is meant to unify the ad auction and provide publishers with more transparency. Jason Bigler, Google’s director of product management, wrote in a blog post that since testing began in March, first-price auctions have seen a “neutral to positive impact” on publishers' ad revenue when compared to second-price auctions.
“In addition, we found evidence that first price auctions have created a more competitive market, resulting in third parties (Demand Side Platforms and Ad Networks outside of Google) and indirect line items (like those from Header Bidding implementations) winning an increased share of impressions,” wrote Bigler.
Google will bring first-price auctions to all Google Ad Manager partners starting next week, and the company expects to finish the roll-out within the next few weeks.
First-price auctions ideally level the playing field by taking away Google’s “last look” advantage. In the second-price model, Google could survey the auction and bid after all bids had been placed, allowing the online advertising giant to grab valuable inventory for a fraction more than what its competitors would have paid.
Andrew Baron, vice-president of marketplace at PubMatic, said Google is essentially giving up the information advantage they've historically had over its competition.
"How exactly this will impact the ecosystem is dependent on which constituent was benefitting most from this advantage – publishers with higher closing prices, buyers with better ROI, or Google themselves," said Baron.
"The market already has the tools at their disposal to ensure a smooth transition: buyers should now weigh Google supply against other channels in their [supply path optimization] decisions; demand-side platforms should focus more on their bid shading capabilities; and publishers should look to wrappers and auction competition to fill any yield gaps that may result from Google’s transition to first price."
Bigler said the coming transition promises “a fair and transparent marketplace that benefits the health of the programmatic ecosystem.”
Google first took steps to move its exchange to a first-price auction in March, a major – albeit delayed – shift as much of the programmatic ecosystem already operated on that model.
“Since we first announced our intent to transition Ad Manager to first-price auctions, we’ve received feedback from many of our partners, which has helped inform our rollout plans,” said Bigler. “This dialogue led to changes such as increasing the maximum number of pricing rules and extending the length of the test period. Although we're not the first to make this change, we’re excited to take this step and continue to work with our partners to create a more sustainable advertising ecosystem.”
Once Google has completed this transition, Bigler said the company will start providing publishers with a bid data transfer file to help evaluate the value of their inventory and learn more about ad buyers’ bidding behavior.
Buyers will receive data on the minimum bid price needed to win an auction after that auction closes.
“This feedback will help you understand when to bid higher to win valuable inventory,” said Bigler.