{"id":11349,"date":"2023-06-25T16:50:00","date_gmt":"2023-06-25T11:20:00","guid":{"rendered":"https:\/\/www.adpushup.com\/blog\/?p=11349"},"modified":"2025-07-16T17:19:26","modified_gmt":"2025-07-16T11:49:26","slug":"first-price-auction","status":"publish","type":"post","link":"https:\/\/www.adpushup.com\/blog\/first-price-auction\/","title":{"rendered":"Why Google Switched to First Price Auction? Insider&#8217;s Insight","gt_translate_keys":[{"key":"rendered","format":"text"}]},"content":{"rendered":"\n<p class=\"has-background\" style=\"background-color:#fffaee\">Discover why Google made the shift to<strong> first price auction<\/strong> from a second-price auction model. Gain insights into the reasons behind this decision and its impact on publishers and advertisers.<\/p>\n\n\n\n<p>Second-price auctions have long been the industry norm in programmatic advertising. Now in a big move, Google has announced that its Ad Manager suite of products will be transitioning to the first-price auction model by the end of this year. Google\u2019s decision comes amid growing voices in the ad tech industry calling for simplicity and transparency.<\/p>\n\n\n\n<p>A number of ad exchanges, including OpenX and Rubicon Project have started offering more straightforward auction practices, now Google\u2019s jump into the foray indicates a tipping point.<\/p>\n\n\n\n<div class=\"poptin-embedded\" data-id=\"56eae03d57402\"><\/div>\n\n\n\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_79_2 counter-flat ez-toc-counter ez-toc-custom ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents:<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #000000;color:#000000\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #000000;color:#000000\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.adpushup.com\/blog\/first-price-auction\/#What_is_a_First_Price_Auction\" >What is a First Price Auction?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.adpushup.com\/blog\/first-price-auction\/#Why_is_Google_Moving_to_First_Price_Auction\" >Why is Google Moving to First Price Auction?<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.adpushup.com\/blog\/first-price-auction\/#Final_Thoughts_on_First_Price_Auction\" >Final Thoughts on First Price Auction<\/a><\/li><li class='ez-toc-page-1'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.adpushup.com\/blog\/first-price-auction\/#FAQs_%E2%80%93_First_Price_Auction\" >FAQs &#8211; First Price Auction<\/a><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"What_is_a_First_Price_Auction\"><\/span><strong>What is a First Price Auction?<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>In a first-price auction, participants bid on an item or contract, and the highest bidder secures the win by paying the full amount they bid. This differs from second-price auctions where the winner pays slightly more than the bid of the second-highest participant.  The first-price auction model promotes transparency and encourages bidders to submit their highest value bid upfront, leading to a straightforward and fair bidding process.<\/p>\n\n\n\n<h3 id=\"h-first-price-auction-vs-second-price-auction\"><strong>First Price Auction Vs. Second Price Auction<\/strong><\/h3>\n\n\n\n<p>Before we get into the differences, let&#8217;s first understand what exactly the second price auction is. <\/p>\n\n\n\n<p>For the uninitiated, second-price auctions mimic how selling works on eBay, meaning that the winning bidder <em>pays one cent more<\/em> than the bid made by the second-highest bidder. In contrast, in first-price auctions, the winning bidder pays the exact bid they made. You can learn more about the <a href=\"https:\/\/www.adpushup.com\/blog\/first-price-auctions-vs-second-price-auctions-understanding-what-they-mean-and-how-they-differ\/\" target=\"_blank\" rel=\"noreferrer noopener\">difference between first- and second-price auctions here<\/a>.<\/p>\n\n\n\n<p>For brands and marketers, second-price auctions work out to be a better deal because the blow from having to pay the highest bid is cushioned. On the publisher side, it typically leads to the <a href=\"https:\/\/www.adpushup.com\/blog\/ad-inventory-management-tips\/\" target=\"_blank\" rel=\"noreferrer noopener\">ad inventory<\/a> being undervalued. For both buy- and sell-side though, the second-price auction adds layers of complexity, as <a href=\"https:\/\/www.adpushup.com\/blog\/supply-side-platform\/\" target=\"_blank\" rel=\"noreferrer noopener\">SSPs<\/a> and <a href=\"https:\/\/www.adpushup.com\/blog\/what-is-demand-side-platform\/\" target=\"_blank\" rel=\"noreferrer noopener\">DSPs<\/a> compete to create bidding algorithms and techniques to optimize the buying and selling process.<\/p>\n\n\n\n<div class=\"wp-block-image\"><figure class=\"aligncenter\"><img loading=\"lazy\" width=\"1000\" height=\"797\" src=\"https:\/\/www.adpushup.com\/blog\/wp-content\/uploads\/2019\/03\/second-price-vs-first-price.png\" alt=\"first price auction\" class=\"wp-image-11351\" srcset=\"https:\/\/www.adpushup.com\/blog\/wp-content\/uploads\/2019\/03\/second-price-vs-first-price.png 1000w, https:\/\/www.adpushup.com\/blog\/wp-content\/uploads\/2019\/03\/second-price-vs-first-price-300x239.png 300w, https:\/\/www.adpushup.com\/blog\/wp-content\/uploads\/2019\/03\/second-price-vs-first-price-768x612.png 768w, https:\/\/www.adpushup.com\/blog\/wp-content\/uploads\/2019\/03\/second-price-vs-first-price-150x120.png 150w\" sizes=\"(max-width: 1000px) 100vw, 1000px\" \/><figcaption>Google&#8217;s move to first-price auctions is expected to make programmatic buying and selling simpler for all parties involved.<br><\/figcaption><\/figure><\/div>\n\n\n\n<hr class=\"wp-block-separator is-style-dots\"\/>\n\n\n\n<p>Here are the differences between second and first price auction in a nutshell.<\/p>\n\n\n\n<figure class=\"wp-block-table aligncenter\"><table><thead><tr><th><\/th><th>Second Price Auctions<\/th><th>First Price Auctions<\/th><\/tr><\/thead><tbody><tr><td><strong>Bidding Mechanism<\/strong><\/td><td>Winning bidder pays one cent more than the second-highest bid<\/td><td>Winning bidder pays the exact bid they made<\/td><\/tr><tr><td><strong>Brand\/Marketer Impact<\/strong><\/td><td>Provides a cushion by not paying the highest bid<\/td><td>May require paying the full bid amount<\/td><\/tr><tr><td><strong>Publisher Impact<\/strong><\/td><td>Ad inventory may be undervalued<\/td><td>Potential for higher revenue<\/td><\/tr><tr><td><strong>Complexity<\/strong><\/td><td>Adds layers of complexity for SSPs and DSPs to optimize bidding algorithms<\/td><td>Simplified bidding process<\/td><\/tr><tr><td>Learn More<\/td><td><a href=\"https:\/\/example.com\/first-second-price-auctions\" target=\"_blank\" rel=\"noreferrer noopener\">Link to learn more<\/a><\/td><td>&#8211;<\/td><\/tr><\/tbody><\/table><\/figure>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Why_is_Google_Moving_to_First_Price_Auction\"><\/span>Why is Google Moving to First Price Auction?<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>Back in 2019, Google transitioned Admob and <a href=\"https:\/\/www.adpushup.com\/blog\/google-ad-manager-account\/\" target=\"_blank\" rel=\"noreferrer noopener\">Ad Manager<\/a> to the first price auction with the intent to create a transparent environment for auctions for both publishers and advertisers. <\/p>\n\n\n\n<p>Here&#8217;s what Google hoped for the outcome of this shift. <\/p>\n\n\n\n<h3><strong>Reduced Complexity<\/strong> <\/h3>\n\n\n\n<p>Reducing complexity is one of the things Google hopes to achieve by moving to the first-price auction model. \u201cIn order to help simplify programmatic for our partners, in the coming months we\u2019ll start to transition publisher inventory to a unified first price auction for Google Ad Manager,\u201d says Sam Cox, Group Product Manager at Google. Back in that time, it was said &#8211; \u201cWe expect the transition to be complete by the end of this year. By switching to a single first price auction, we can help reduce complexity and create a fair and transparent market for everyone.\u201d<\/p>\n\n\n\n<h3><strong>Increased Ad Revenue for Publishers<\/strong><\/h3>\n\n\n\n<p>Publishers are initially expected to see <strong>a jump in ad revenue<\/strong>. Once buyers adjust their bids according to the value of impressions under the new auction model, that revenue jump is expected to return to the baseline. \u201cWith this change, every offer from programmatic buyers will compete in the same <a href=\"https:\/\/www.adpushup.com\/blog\/what-is-unified-auction-how-is-it-different-from-header-bidding\/\">unified auction<\/a>, alongside inventory which is directly negotiated with advertisers. <\/p>\n\n\n\n<p><\/p>\n\n\n\n<p>An advertising buyer\u2019s bid will not be shared with another buyer before the auction or be able to set the price for another buyer. The buyer that wins the auction pays the price they bid. By simplifying our auction in Ad Manager, we can help make it easier for publishers and app developers to manage and get fair value for their inventory,\u201d Cox added.<\/p>\n\n\n\n<h3>Fair Competition: Maximizing Publisher Revenue<\/h3>\n\n\n\n<p>In first price auctions, fair competition drives publishers&#8217; revenue growth. Advertisers are motivated to submit their best bids, knowing that only the highest bidder secures the impression. This competitive bidding environment can lead to higher prices for publishers, maximizing their earnings potential.<\/p>\n\n\n\n<h3>Reduced Bid Shading Risks<\/h3>\n\n\n\n<p>First price auctions significantly reduce <a href=\"https:\/\/www.adpushup.com\/blog\/what-is-bid-shading\/\">bid shading<\/a> risks. Advertisers have less incentive to strategically lower their bids, as underbidding may result in losing the impression entirely. This encourages advertisers to bid their true value, aligning bids more closely with the market worth of the <a href=\"https:\/\/www.adpushup.com\/blog\/sell-ad-space\/\" target=\"_blank\" rel=\"noreferrer noopener\">ad space<\/a>. As a result, publishers experience improved profitability and receive bids that better reflect the actual value of their inventory.<\/p>\n\n\n\n<p>Moreover, the shift to first-price auctions will improve an already dominant position for Google as their win rates rise,&#8221; Shubham Grover, Product Specialist at AdPushup says. <em>&#8220;This will also make <a href=\"https:\/\/www.adpushup.com\/header-bidding-guide\/\">header bidding<\/a> less effective and generate good PR for Google. Publishers can expect increased yield initially, followed by DSPs optimizing their algorithms for bid shading.&#8221;<\/em><\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"Final_Thoughts_on_First_Price_Auction\"><\/span>Final Thoughts on First Price Auction<span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<p>The introduction of first-price auctions in the advertising industry has brought about various practices, including bid shading, which acts as a compromise between <a href=\"https:\/\/www.adpushup.com\/blog\/supply-side-platform\/#:~:text=A%20supply%2Dside%20platform%20(SSP,That's%20pretty%20much%20it.\" target=\"_blank\" rel=\"noreferrer noopener\">SSPs<\/a> and <a href=\"https:\/\/www.adpushup.com\/blog\/demand-side-platforms-dsps-how-are-they-evaluated\/\" target=\"_blank\" rel=\"noreferrer noopener\">DSPs<\/a> when the winning bid is excessively high. For example, if the winning bid is $10 and the second highest bid is $4, it highlights potential losses for advertisers. These bid shading practices suggest that DSPs are still adapting to the dynamics of first-price auctions.<\/p>\n\n\n\n<p>To ensure a smooth transition, Google will gradually implement the update, allowing all involved parties sufficient time to adjust their programmatic strategies. According to the blog post addressing the update, Google plans to provide a preparation period of several months before commencing testing.<\/p>\n\n\n\n<p>It is important to note that Google&#8217;s shift to a <a href=\"https:\/\/www.adpushup.com\/blog\/google-ad-manager-unified-pricing-rules-guide\/\" target=\"_blank\" rel=\"noreferrer noopener\">unified first-price <\/a>auction model solely affects the sale of display and video inventory through Ad Manager. This change will not impact auctions for ads on Google Search, AdSense for Search, YouTube, or other Google properties. Advertisers using Google Ads or Display &amp; Video 360 are not required to take any specific action.<\/p>\n\n\n\n<h2><span class=\"ez-toc-section\" id=\"FAQs_%E2%80%93_First_Price_Auction\"><\/span><strong>FAQs &#8211; First Price Auction <\/strong><span class=\"ez-toc-section-end\"><\/span><\/h2>\n\n\n\n<div class=\"schema-faq wp-block-yoast-faq-block\"><div class=\"schema-faq-section\" id=\"faq-question-1687713683905\"><strong class=\"schema-faq-question\">1. What is the first price style auction in simple words?<\/strong> <p class=\"schema-faq-answer\">In a first-price auction, the highest bidder pays the exact amount they bid to secure the item or win the auction.<\/p> <\/div> <div class=\"schema-faq-section\" id=\"faq-question-1687714210143\"><strong class=\"schema-faq-question\">2. What are the benefits of a first-price auction?<\/strong> <p class=\"schema-faq-answer\">The benefits of a first-price auction include increased transparency, fair competition, and the potential for higher revenue for sellers or publishers. It incentivizes bidders to submit their true value and eliminates complexities associated with bid shading or strategic bid lowering.<\/p> <\/div> <\/div>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"excerpt":{"rendered":"<p>Discover why Google made the shift to first price auction from a second-price auction model. Gain insights into the reasons behind this decision and its impact on publishers and advertisers. Second-price auctions have long been the industry norm in programmatic advertising. Now in a big move, Google has announced that its Ad Manager suite of<\/p>\n","protected":false,"gt_translate_keys":[{"key":"rendered","format":"html"}]},"author":60,"featured_media":28869,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"content-type":"","om_disable_all_campaigns":false,"inline_featured_image":false,"apple_news_api_created_at":"2019-03-07T11:21:03Z","apple_news_api_id":"9d017168-6691-4f82-8540-1968b82f4c98","apple_news_api_modified_at":"2019-04-10T09:24:24Z","apple_news_api_revision":"AAAAAAAAAAAAAAAAAAAAAw==","apple_news_api_share_url":"https:\/\/apple.news\/AnQFxaGaRT4KFQBlouC9MmA","apple_news_coverimage":0,"apple_news_coverimage_caption":"","apple_news_is_hidden":false,"apple_news_is_paid":false,"apple_news_is_preview":false,"apple_news_is_sponsored":false,"apple_news_maturity_rating":"","apple_news_metadata":"\"\"","apple_news_pullquote":"","apple_news_pullquote_position":"middle","apple_news_slug":"","apple_news_sections":"[\"https:\\\/\\\/news-api.apple.com\\\/sections\\\/2384f969-0b7d-3e23-907b-d8b4b94ce6f8\"]"},"categories":[6452],"tags":[11372,11373],"apple_news_notices":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO Premium plugin v18.5 (Yoast SEO v18.9) - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Why Google Switched to First Price Auction? Impact, Benefits, &amp; More<\/title>\n<meta name=\"description\" content=\"Discover why Google made the shift from a first price auction to second-price auction model. Find out its impact on publishers &amp; advertisers.\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.adpushup.com\/blog\/first-price-auction\/\" \/>\n<meta name=\"twitter:card\" content=\"summary\" \/>\n<meta name=\"twitter:title\" content=\"Why Google Switched to First Price Auction? Impact, Benefits, &amp; More\" \/>\n<meta name=\"twitter:description\" content=\"Discover why Google made the shift from a first price auction to second-price auction model. 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