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2nd price vs. 1st price auction - a DSP perspective
- 1. 2nd price vs 1st price Discussion Christian Eisenblätter Manager Programmatic Supply Pr0grammat1c Meetup – Berlin 14.11.2017
- 2. What exactly has happened / is happening?
- 4. Why is this a problem? It is not a problem at all!
- 5. 5
- 6. Why is this a problem? It is not a problem in general! BUT(T)!
- 7. B 2 € 10 € 2 € 2nd highest bid A
- 8. 8
- 9. What are the risks for buyers?
- 10. 2 € 10 € 9,90 € 2nd highest bid 9,90 € A BC
- 11. What else? Header bidding / Multi SSP approach not working properly on 2nd price auction
- 12. B 2 € 10 € 3 € 5 € SSP 1 SSP 2 2 € 3 € C D B 2€ D 3€ A D 3€
- 13. 13
- 14. 14
- 15. 15
- 16. First Price Auction BidCPM = WinCPM
- 17. B 2 € 10 € 10 € 1st Price Auction A
- 18. How does bidding behaviour have to change? Less strategic – more real auctioning
- 19. 19
- 20. Why would anyone want to change? - hidden fees - manipulated auction dynamics - etc. no fair 2nd price auction anymore
- 21. Buyers perspective: - header bidding issue will be gone - you can control your max. winCPM now - transparent charging
- 22. Sellers perspective: - buyers will now have to decide what the impression is really worth to them
- 23. 23
- 24. Thank you info@travelaudience.com +49 (0) 30 530 2306 10
Editor's Notes
- I would like to elaborate a bit on the recent change from 2nd price to 1st price auction logic that some of the biggest and to us most important SSPs apart from Google just realized. Especially i would like to go through some related changes from the supply- and from the buyers perspective and show our point of view in that process. Moreover I'd love to realize this as a discussion as i believe it is a topic that allows to have different opinions and point views. So please feel free to scream and shout right inbetween whenever you feel like something has to be said and added or revised.
- To make it very simple: Some SSPs changed their logic on basically how much to charge the winner of an auction.
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- - bidding higher than you actually are willing to pay (relatively low risk - you can always be sure that your win price will be at least lower than your bid price) - 2nd price from a seller perspective: some buyers are bidding very high but you can only charge the second highest bid. that hurts. Because from a sellers perspective, the actual bidCPM represents the price that the buyer is willing to pay for the impression
- - 2nd price auction brings the risk to get manipulated. If someone is interested in increasing the winCPM of buyers, that turns out to pretty easy. The supply side is able to see the actual highest bid. Why not just bidding a bit lower than this highest bid.
- Buyer C: 9,90€. Buyer B still wins but pays 9,90 € instead of 2€.
- 2nd price auction how it should look like
- 2nd price auction how it should look like
- Manipulated 2nd price auction
- you actually have to pay what you bid. BidPrice=WinPrice. Main difference: your bid price somehow has to reflect what you are actually willing to pay.
- avg. bid prices should go down. Bidding 100€ is now much more risky as you have to expect that you have to pay 100€. So better chose a more progressive approach. Maybe start low and see how your win Rate evolves. At some point you will have found your optimal bid CPM. Definitely your bidding strategy has to be a bit more intelligent from now on.
- Cover example with photo inside the shape Insert new photo: Click on Insert photo-icon on slide and Insert new photo Use Crop Tool under Picture Tools to pan and zoom Beware: when you add or replace a picture, it may come to the front. Right click on it and select ‘Send to back’ to re-arrange it. To update the text, just click on the text To get more slides with this layout just copy this slide and paste
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- Now the Big BUTT! As the bidding behaviour on 1st price auctions is totally different to 2nd price auctions, Sellers, DSPs and Buyers HAVE to know about this change. That's obvious. I do not criticize the decision that has been made to change auction logic but i do criticize the way how it has been done and especially communicated. At this years Dmexco, we have been meeting the SSPs as usual. We reviewed business. We had a lot of good small talk. After 30 Minutes of speaking and drinking coffee, right before we were about to say goodbye and wish a nice afterparty, they said they have some very nice surprise for us: “We now do transparent auctions”. (?? transparent auctions??great!! what is it?). That's how SSPs call 1st price auctions. It's a nice marketing gimmick. Let's give it a nice name. Transparent is a very positive word. So 1st price auctions must be something good. Then they said: the best thing is, we will start like… next week. And then they were surprised that we haven't been very happy about it. Some other SSP said they already started it and we should see some “good results now”. What they didn't understand, it actually caused some real financial damage. The thing is: we always want to improve. Also 1st price bidding makes a lot of sense. But to a DSP, this requires some serious development efforts. And time. More than 5 days. We need to be prepared. First of all technically. So basically our bidder did auctions with a 2nd price auction logic on 1st price auction requests. I think this was not okay. Communication was a catastrophy. Also only 1 seller out of loads of has told us before.
- Cover example with photo inside the shape Insert new photo: Click on Insert photo-icon on slide and Insert new photo Use Crop Tool under Picture Tools to pan and zoom Beware: when you add or replace a picture, it may come to the front. Right click on it and select ‘Send to back’ to re-arrange it. To update the text, just click on the text To get more slides with this layout just copy this slide and paste