Google is changing AdSense to a primary value public sale


First price auctions come to Google AdSense.

The change should come into effect this year, Google announced in a blog post on Thursday.

Google Ad Manager and AdMob have already switched to a first price auction.

Although not nearly as serious as Google, which flipped the switch for Ad Manager, the AdSense change signals that the momentum behind the switch to first-price auctions has not slackened.

While most of the ecosystem has already switched to a first-price auction, AdSense has been an obstacle.

Meanwhile, Google’s business practices at auctions have come under increasing scrutiny.

An antitrust lawsuit against Google led by Texas and other attorneys general is alleging illegal monopoly over the Google Display Network – which also includes AdSense for content sites – and Google Ads, which offers on AdSense.

In light of the lawsuit, eliminating a controversial practice makes good business sense for Google.

Compared to a second price auction, first price auctions are easier and more transparent for buyers. You bid $ 7, you pay $ 7, end of story.

For second price auctions, the margin between an advertiser’s bid (the same 7) and second price (maybe just $ 2) leaves potentially large margins in between. In our hypothetical example, that would be $ 5 if an exchange wanted to participate in the auction.

Tech companies often pocketed some of that spread, sometimes benevolently referring to margins as “buy-side fees.” Similarly, exchanges could use a “discount” they received on one bid to subsidize another auction, thereby increasing the exchange’s overall win rate.

Without the second-price auction model and its dismal fee structure, the fuss about the so-called “ad tech tax” would probably not have reached such a boiling point.

Above all, Google has set up its second price auctions in such a way that it could gain an advantage for itself. Since Google controls both an exchange and the dominant ad server, it did not blindly bid in the auction, but gave itself the “last look” and the opportunity to surpass the other bids.

Because of this practice, it has been widely believed that win rates through the Google exchange are higher than those outside of exchanges.

In its blog post, Google says that moving from AdSense to a first price auction should have a neutral effect on publishers.

The change will “increase advertisers’ trust in digital advertising,” said Google product manager Matt Wong, nodding to how the lack of transparency in secondary price auctions has made advertisers shy of where their programmatic dollars go.

Theoretically, the switch should also benefit outside of DSPs bidding on AdSense by conducting the auction under the same conditions.

But the industry is a little dubious.

With the move excluding AdSense for search results pages, Google’s dominant and exclusive product, “What difference does it make?” said a media manager who requested anonymity to speak out against Google. “I assume Google is making room in its black box for expanded bidding and monetization options.”

This skepticism stems from Google’s history of making changes ostensibly to increase transparency, but with hidden benefits that were only discovered later. For example, one of the allegations in the state-owned corporation’s lawsuit is that when Google removed its last Look advantage in 2017, Google redeveloped “the ability to trade in front of competitors” through a “predictive modeling based bid optimization scheme.”

In other words, a black box machine to stay ahead of the curve.

The media executive also noted that AdSense continues to offer a treasure trove of data that Google uses for all of its advertising products – something Google itself recently publicly mentioned when talking about its move to big data-powered AI attribution modeling.

So what do you think of it if AdSense switches to a first price auction?

Depending on how you look at Google, change will either continue its slow pace towards transparency and equality, or it will be part of a larger re-architecture that will ultimately keep Google at the forefront.


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