We have heard that there is a change in Google Ads Manager affecting the auction dynamics and the way we bid. What is this change and how do we approach it?
We are all familiar with second price auctions. This is where the bidder is guaranteed that they will pay no more than the value of the next higher bidder. However, by Q4 2019, this is going to change.
The change that will come into effect on Ads Manager concerns the auction type which will become a unified first price auction. This is simply where the highest bidder wins and pays the bid price. Competing bids by other advertisers will not affect the price paid which makes the environment more transparent and fair.
As both buyers and sellers will be required to make changes to their programmatic strategies, Google will give everyone some time to prepare before they start testing.
Why the change in Auction Dynamics
There has been a need for more transparency on Auction Dynamics and for advertisers to know what type of auction they are bidding on. The RTB ecosystem has become so much more complex over the years so a single ad can pass through multiple auctions with different rules before a winning bid is selected and the ad is served.
Therefore moving to a first price auction will make it clearer to buyers and agencies on the value of the inventory they are buying. This will allow for a more fair and stable marketplace. In a first price auction, all buyers will compete in one auction instead of multiple.
Currently not all authorized buyers chose to share and receive bid data which resulted in gaps in historical data that is shared with publishers and authorized buyers. By changing to a first price auction all Ads Manager partners will be required to share and receive bid data. Publishers will be provided with reporting on all bids submitted for their ads and will give buyers access to the price that was needed to win the auction they bid for.
Floor price rules that are used in conjunction with second price auctions will no longer work in a first price auction. Publishers will be able to make use of new unified pricing rules that will help manage their floor prices across non-guaranteed inventory. The rules can be setup in one place to provide the Publisher more control and will lead to less errors on the multiple platforms used.
Floor prices now will not be able to be set for individual buying platforms which allows for a transparent auction.
How to deal with this change?
Using automated bid strategies are one way of dealing with this, the algorithms are constantly monitored and adapted to ensure advertisers win inventory at the best price while reaching their goals. Therefore automated bid strategies should not be affected by the change in auction type.
This also applies to deals such Always On (AO) campaigns and Private Auctions (PA). However, the automated bidding algorithm is not aware of the floor prices and the algorithm will bid for the impression the same way as it does for an open auction. This could result in under-pacing if the bid is below the CPM floor.
If you do use fixed bids, you can opt in to use ‘Optimized Fixed Bidding’. This feature will optimize your fixed CPM bids to get impressions at the best and lower price.
To check if you have opted in for this feature, navigate to ‘Basic Detail’ under your partner settings. Also ensure you select the advertisers to fully opt in.
When using fixed bids, it is recommended to use fixed CPM bids that are in line with what you think the value of the inventory is worth.
Best practice going forwards
The solution here is to make use of automated bid strategies as the algorithms are designed to calculate the right bid. If you making use of this bid strategy already, stick with it as this will help to avoid overpaying for impressions.
Important to note that unified first price auction will only impact display and video inventory sold via Ad Manager.
Jenna McCune is the ad operations specialist at The Media Image.