In second-price auctions, the spread between a marketers quote (the same $7) and the 2nd price (maybe just $2) leaves potentially large margins in between. In our theoretical example, that would be $5 up for grabs if an exchange wished to video game the auction.
Tech companies would frequently pocket some of that spread, sometimes benignly describing the margins as “buy-side fees.” Exchanges could use a “discount” they received on one quote to fund another auction, thereby enhancing the exchanges overall win rate.
The hassle that kicked up around the so-called “ad tech tax” likely would not have reached such a boiling point without the second-price auction model and its dirty cost structure.
Google in specific set up its second-price auctions in a manner that advantaged itself. Since Google controls both an exchange and the dominant ad server, it did not bid blindly into the auction, but rather provided itself “last look” and a chance to finest the other bids.
Due to the fact that of this practice, win rates through Googles exchange were commonly thought to be greater than outside exchanges.
In its blog post, Google states moving AdSense to a first-price auction should have a neutral impact on publishers.
The change will “grow marketer costs confidence in digital marketing,” said Google product manager Matt Wong, a nod to how the lack of transparency in second-price auctions made advertisers skittish about where their programmatic dollars were going.
Theoretically, the move needs to benefit outdoors DSPs that bid into AdSense by putting the auction on a more level playing field.
The industry is a little suspicious.
Due to the fact that the relocation leaves out AdSense for Search, Googles dominant and unique product, “What distinction does it make?” stated a media executive who requested privacy to speak up against Google. “I expect this is Google including advanced bidding and money making chances in their black box.”
That skepticism comes from Googles history of making changes ostensibly to increase openness but with hidden advantages for itself that were discovered only later. One of the allegations in the claim brought by the state AGs is that when Google eliminated its last appearance benefit in 2017, it “reengineered the ability to trade ahead of rivals” through a “quote optimization plan based on predictive modeling.”
In other words, a black-box machination in order to keep its edge.
The media executive also noted that AdSense continues to offer a bonanza of data that Google utilizes across all of its ad items– something Google itself publicly mentioned recently when discussing its move to big data-fueled AI attribution modeling.
What to make of AdSense changing to a first-price auction?
Depending upon your view of Google, the modification either continues its sluggish move towards transparency and equality or its part of a larger rearchitecting that will ultimately keep Google on top.

First-price auctions are pertaining to Google AdSense.
The change will enter into effect later this year, Google shared in a post on Thursday.
Google Ad Manager and AdMob have actually currently switched to a first-price auction.
Not almost as special as when Google turned the switch for Ad Manager, the AdSense modification signals that momentum behind the relocation to first-price auctions has actually not receded.
While many of the ecosystem has already shifted to a first-price auction, AdSense was a holdout.
Googles auction organization practices have come under increased analysis.
An antitrust claim led by Texas and other state chief law officers against Google makes accusations of illegal monopolization focused on the Google Display Network– that includes AdSense for Content– and Google Ads, which bids into AdSense.
Because of the fit, removing a controversial practice makes great business sense for Google.
Compared to a second-price auction, first-price auctions are easier for purchasers and more transparent. You bid $7, you pay $7, end of story.