OnDemand WTP Pricing Research

Understanding Programmatic Auction Pricing Is a Major Priority for Marketers | eMarketer

Programmatic auctions have historically operated on a second-price basis. In second-price auctions, the second-highest price determines the amount of money the auction winner will pay. So if the highest bid is $10 and the second-highest bid is $5, the winner of a second-price auction will pay $5.01.

This style of pricing was easier to navigate before header bidding became popular and supply-side platforms (SSPs) started simultaneously bidding on the same piece of inventory. With so many vendors sending so many bids at the exact same time, publishers and advertisers alike became prone to gamesmanship. OpenX and an unnamed demand-side platform (DSP) teamed up and found that some SSPs were raising their price floors after bids came in, which allowed the SSPs to pocket extra money from advertisers and their DSPs.

Last year, to make pricing more transparent, several of the industry’s largest SSPs announced they would be shifting their auctions to first-price models, in which the highest bid determines what the winner pays. In a first-price auction, for example, if the highest bid is $10, the winner will pay $10. That sounds simple enough, but not all SSPs made this shift, so advertisers were left in the lurk trying to figure out if a given auction was first- or second-price.

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Understanding Programmatic Auction Pricing Is a Major Priority for Marketers – eMarketer.