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Google operates one of the largest exchanges for advertising - ad sellers place their inventory up for auction using Google tools and each integrated ad network

Google operates one of the largest exchanges for advertising - ad sellers place their inventory up for auction using Google tools and each integrated ad network can place a single blind bid to try to buy the inventory. The catch is that Google operates their own ad network and can leverage their visibility into the exchange to be only bidder who is not blind. For any given inventory, Google can wait for every ad network to submit their bid and then make a decision as to whether or not they should place the highest bid to win the auction. The information asymmetry allows Google to bid more efficiently - if they're prepared to bid $5 but they know everyone else is bidding $1, they'll lower their bid to $1.01.

thu2111 5y ago
Thank you. That is a much clearer explanation than in the article itself. Aren't ad auctions second-price though? I thought the magic formula for ppc ads was that the winner pays whatever the second highest bid was.
- manigandham 5y ago
  Much of the industry has returned to first-price auctions (for many reasons like the rise of header bidding)
- throwbernanke 5y ago
  That used to be the case, and so for space efficiency the long tail of 3rd and lower bids from every company was truncated before even going into the auction process. That is about the only hint you need to know to understand what project Bernanke was (apart from the willingness to assume that it was fair, and the past bid data was used only to compute initial experiment constants in the adjusted bidding formulas).
t0mas88 5y ago
Their cheating is exactly as you think it is, but the last example is not how this market works. It's a second price auction, so after 10 other bidders the highest bid is $1 it wouldn't matter whether you bid $1.50 or $10, you would always pay $1.01 But the rest of it is true, Google has access to the data on all sides and is abusing it. The acquisition of DoubleClick should have never been approved and the earlier we break them up the better.
- marketingtech 5y ago
  Facebook uses a second price auction. Google does not. https://www.adexchanger.com/online-advertising/google-switches-to-first-price-auction/ https://www.adexchanger.com/online-advertising/google-switch...
  - Pils 5y ago
    > Google isn’t abandoning second-price auctions for products where it controls the end-to-end buying experience. YouTube, Google Search, AdSense for Search and other Google properties will continue to use second-price auctions.
    - manigandham 5y ago
      Google owned properties are not being discussed here; they aren't exposed externally and therefore have no external data to collect.

thu2111 5y ago

Thank you. That is a much clearer explanation than in the article itself. Aren't ad auctions second-price though? I thought the magic formula for ppc ads was that the winner pays whatever the second highest bid was.

manigandham 5y ago
Much of the industry has returned to first-price auctions (for many reasons like the rise of header bidding)
throwbernanke 5y ago
That used to be the case, and so for space efficiency the long tail of 3rd and lower bids from every company was truncated before even going into the auction process. That is about the only hint you need to know to understand what project Bernanke was (apart from the willingness to assume that it was fair, and the past bid data was used only to compute initial experiment constants in the adjusted bidding formulas).

t0mas88 5y ago

Their cheating is exactly as you think it is, but the last example is not how this market works. It's a second price auction, so after 10 other bidders the highest bid is $1 it wouldn't matter whether you bid $1.50 or $10, you would always pay $1.01 But the rest of it is true, Google has access to the data on all sides and is abusing it. The acquisition of DoubleClick should have never been approved and the earlier we break them up the better.

marketingtech 5y ago
Facebook uses a second price auction. Google does not. https://www.adexchanger.com/online-advertising/google-switches-to-first-price-auction/ https://www.adexchanger.com/online-advertising/google-switch...
- Pils 5y ago
  > Google isn’t abandoning second-price auctions for products where it controls the end-to-end buying experience. YouTube, Google Search, AdSense for Search and other Google properties will continue to use second-price auctions.
  - manigandham 5y ago
    Google owned properties are not being discussed here; they aren't exposed externally and therefore have no external data to collect.