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Auction Types

Understand first-price and second-price auctions, and how they affect your bidding strategy.

The two auction types​

TypeWinner paysIndustry status
Second-priceSecond-highest bid + $0.01Legacy (pre-2019)
First-priceTheir actual bidCurrent standard

Second-price auctions (historical)​

In a second-price auction, the winner pays just above the second-highest bid:

Example — second-price auction

BidderBidRole
Partner A$3.00Winner
Partner B$2.50Sets price (second-highest)
Partner C$2.00—

Winner pays: $2.51 — second price + $0.01.

Why it existed: Encouraged truthful bidding. Bidders could bid their true value without worrying about overpaying.

Why it's gone: The ecosystem became too complex. With multiple auctions happening (header bidding, then ad server), buyers were paying more than necessary.

First-price auctions (current standard)​

In a first-price auction, the winner pays exactly what they bid:

Example — first-price auction

BidderBidRole
Partner A$3.00Winner
Partner B$2.50—
Partner C$2.00—

Winner pays: $3.00 — their actual bid.

The shift: Starting in 2019, the industry moved to first-price auctions for transparency and simplicity.

How first-price affects you​

For publishers (you)​

Pros:

  • Simpler to understand
  • Often higher revenue (winners pay full bid)
  • More transparent pricing

Cons:

  • Buyers bid more strategically (lower)
  • Need to set floors carefully

For buyers​

Buyers now use bid shading — algorithms that reduce bids to avoid overpaying. They're trying to find the sweet spot above your floor but below their maximum value.

Bid shading explained​

ScenarioBuyer's valueBuyer's bidBuyer paysNote
Without bid shading$5.00$5.00$5.00Potentially overpaying
With bid shading$5.00$3.20$3.20Algorithm estimates winning price around $3.00

Impact on publishers: Buyers bid lower than they would in second-price. This is why floors matter more now.

Why floors matter in first-price​

In a second-price world, floors were less critical. In first-price:

ScenarioBidder ABidder BYou earn
No floor$0.50 (wins)$0.40$0.50
$1.00 floor$1.20 (wins)$1.10$1.20 (+140%)

Bidders must clear the floor — shading algorithms respond by raising their bids, capturing value that would otherwise sit on the table.

Floors force bid shading algorithms to bid higher, capturing value that would otherwise be left on the table.

Learn more: Floor Strategies →

Unified auction in GAM​

Google Ad Manager runs a unified first-price auction that includes:

  1. Prebid bids — From your header bidding partners
  2. AdX demand — Google's exchange
  3. Direct deals — Your sold campaigns

All compete in the same auction. Highest bid wins.

SourceBidResult
Prebid winner$2.50—
AdX (Google's exchange)$2.30—
Direct deal$3.00 CPMWins

Final winner: direct deal.

Practical implications​

Setting timeouts​

First-price means every bid matters. Don't set timeouts so low that you miss high-value bids.

Floor strategy​

More important than ever. Start with conservative floors and adjust based on fill rate data.

Partner diversity​

Different partners use different shading algorithms. More partners = more varied bidding = better price discovery.

Monitoring​

Watch for partners that consistently bid just above your floor — they may be gaming the system.

Common questions​

Do I need to do anything different for first-price?

Not really. The Anima platform handles the mechanics. Focus on:

  • Setting appropriate floor prices
  • Having enough demand partners
  • Monitoring performance
Why don't buyers just bid $0.01?

Competition. If they bid too low, they lose the auction to someone willing to pay more. Bid shading finds the balance between winning and not overpaying.

Is first-price better for publishers?

Generally yes, when combined with smart floor strategies. The transparency also helps you understand your true inventory value.