Programmatic platforms are making quick work in transitioning how they price inventory.
In March, demand-side platform (DSP) Getintent analyzed 338 billion ad impressions across 39 US supply-side platforms (SSPs) and found that 43.3% of impressions were sold through first-price auctions. That figure was significantly higher than in December 2017, when just 5.8% of the 171 billion impressions analyzed were sold that way.
In a second-price auction, the highest bidder wins, but the price paid is the second-highest bid. Programmatic platforms have typically run second-price auctions, but over the past year many platforms have switched to first-price models, in which the highest bid determines the clearing price.
Each platform has used a different approach in transitioning to first-price auctions, with some companies leaving it up the publisher to decide how the inventory will be sold, while others mandate the pricing changes for all of their customers. Getintent estimated that platforms like PubMatic and OpenX sell between 40% and 60% of their inventory through first-price auctions. Meanwhile, Index Exchange sells virtually of all its inventory that way. While a few SSPs had volatile month-to-month swings in the amount of inventory sold through first-price auctions, in most instances there was a steady uptick in first-price impressions from December to March, according to the study.
It’s also worth noting that the 39 SSPs Getintent analyzed are of varying sizes, meaning that changes by the top SSPs will have a bigger impact on the industry than those made by smaller platforms. Even though 43% of impressions were sold via first-price auctions, just 20% of the SSPs Getintent analyzed allowed first-price sales.
“The share of the first-price auction [impressions] is significantly bigger, since it’s mainly bigger SSPs that have made a move to the first price, and they offer more supply,” said Anna Astapenko, Getintent’s marketing manager.
It’s relevant for programmatic ad buyers to be aware of how auction pricing is changing, because different pricing structures require different strategies.
If buyers wrongly believe they’re bidding on a second-price auction, they’ll end up paying more than they anticipate. And if they wrongly think they’re bidding into a first-price setup, they won’t pay enough to win the inventory they seek. As first-price adoption continues to gain momentum, ad buyers should take care to understand the ongoing pricing changes to ensure that they’re getting what they believe they paid for.