What are first-price auctions?
Automated adverts have a complex form, making it increasingly difficult for both the buy-side and sell-side to properly price the resource we are promoting. First-price auctions are called English auctions. They function by holding auctions on an upwardly sloping basis. First or second price auctions are in fact old economic theories apart from the automation we are widely familiar with. First-price auctions involve bid shadowing, a well-known technique that buyers use in first-price auctions to avoid overpaying, additionally in a first-price auction setting a floor cannot manipulate the clearing price. It reduces complexity in the advertising environment.
What are second-price auctions?
First and foremost, second-price auctions give advertisers the opportunity to set a high bid that reflects the upper limit of what it is worth, but in reality they only pay one cent more. It’s a model that works well, but especially when there are multiple bidders in the auction. In which industry do they work? Second-price auctions are not only used in the programmatic industry, as their entire format is readily used by national banks around the world. Second-price auctions had as their main objective to allow advertisers to bid for their entire budget. Thanks to first or second price auctions, advertisers would never pay more per display than it was worth.