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FPA is the devil, I'm pretty sure that the only reason Google implemented it is that they needed to juice their revenue numbers. Like, the trouble with FPA is
by disgruntledphd2 5y ago
FPA is the devil, I'm pretty sure that the only reason Google implemented it is that they needed to juice their revenue numbers.
Like, the trouble with FPA is that it extracts "too much" money from the bidder, as they pay their marginal cost. GSP (second price more generally) does have the nice property that you'll always pay less than your maximum bid, which is the margin (assuming you're bidding your maximum profitable LTV).
Also, congratulations Andrew, I'm sure you guys are gonna do incredibly well (and if you have problems in this space, I strongly recommend giving promoted.ai a look).
- andrewyates2020 5y agoGsp does NOT have this dominant strategy property! People think it does which ironically makes it much better at “extracting value.” non repeated second price auction has this property. Gsp will almost always overprice just like fpa except in very unrealistic situations
- disgruntledphd2 5y agoSo, in a FPA I bid $1. I win, and pay $1. In a GSP, I bid $1. I'll pay the second price (not really but for purposes of clarity assume it) which was $0.90. In this case, I always (almost) pay less than my maximum bid, which allows for margin given to me (assuming true value and a bunch of other unrealistic things) rather than in the FPA, where I pay $1, assuming my bid is highest. I'm not talking in incentive-compatibility terms, rather in terms of where the "margin" goes.
- andrewyates2020 5y agoIn FPA, you need to strategically lower your bid to get "margin." In GSP, that's also true. I have some details here: https://medium.com/promoted/when-goog-fb-is-bad-for-your-performance-ads-business-part-2-8831cdc1b84b https://medium.com/promoted/when-goog-fb-is-bad-for-your-per...