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Google Shifts AdSense to First-Price Auction to Better Align with Other Ad Exchanges

Here’s an important one for those utilizing Google AdSense – the platform is being moved to a first-price auction model ‘in the coming months’, which will bring AdSense into line with Google’s other ad offerings, while also enabling Google to better compete with other ad exchanges.

Not sure what a first-price bidding model is?

As explained by Google:

“In the early days of online display advertising, ad space was sold to advertisers in a second-price auction, where the final price paid by the winner was determined by the amount of the second-highest bid. Over time, many ad selling platforms in the display advertising ecosystem, including Google Ad Manager and Google AdMob, switched their auction to first-price. In a first-price auction, the final price reflects the winning bid.”

For example, right now, in AdSense bidding, the final price of each ad is 0.01c higher than the second-placed bid. So if two brands bid $5 and $6 respectively for an ad slot, the winning bidder ends up paying $5.01. Under a first price auction model, however, the winning bid would be the full top bid – so the advertiser would pay $6 for the impression.

As Google notes, it’s already moved several of its ad products across to the first-price system, while most if its competitors have also shifted to header bidding, so it makes sense for AdSense to also come into line.

That will likely mean more revenue for publishers, and Google – though Google says that the actual impacts will be limited.

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Due to the dynamic auction environment, we cannot predict how specific AdSense publishers will be impacted. But, on average we expect the impact to AdSense publishers’ earnings overall from the move to a first-price auction to be neutral. When Ad Manager moved to a first-price auction, there was a neutral to slightly positive impact to publisher earnings on average.

Given various other platforms and exchanges have already made the change, it makes sense for Google to also update its approach. And while Google does expect to see minimal impact, it is worth noting for AdSense buyers, in considering how you structure your bids, and plan your spending.

You can read more about the coming update here.

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