This post was most recently updated on January 10th, 2022
By the end of this year, Google is about to lift AdSense from a second-price auction model to a first-price auction model (as per Big G’s latest announcement).
Google switching the AdSense Auction To First-Price in Q4 2021 will make it easier for buyers to bid on every ad inventory sold on Google AdSense.
This will be happening automatically & you don’t need to take any action here.
Google AdSense was using a sealed-bid second-price auction in the past for media buyers who were looking to bid on ad inventory.
This usually involves the winner (who offers the most) paying the expense of the 2nd highest bid.
First Price Auction: The final price is equal to the winning bid in the google ad auction.
Second-Price Auction: The second-highest bid determines the final price paid by the winning bidder.
Second-price auctions are simply first-price auctions with reduced bids. Publishers receive less advertising revenue in second-price auctions because the process results in decreased bids.
Publishers can therefore set floor prices as a way to count bids based on a fixed amount. The floor price’s main goal is to hike the closing bid.
As a result of the inconsistencies in how various exchanges manage auctions, the first-price auction also ensures better transparency than second-price auction google ads.
In this way, buyers from one exchange have higher chances of competing fairly with media buyers from another exchange in these online ad auctions.
According to Google, the AdSense process is now aligned with other platforms in the display advertising ecosystem, which is expected to simplify the buying experience for buyers.
Buyers can now use a single bidding approach across AdSense, AdMob, and AdManager, & improve advertiser spend confidence.
The switch to first-price auctions applies only to AdSense for Content, AdSense for Video, & AdSense for Gaming.
AdSense for Shopping or AdSense for Search is not affected.
For instance, as of now, in Google AdSense bidding, the closing bid of any ad is $0.01 more than the 2nd placed bid.
If 2 brands are bidding $10 and $11 each for one ad slot, the winning bidder will end up paying $10.01.
Under an AdSense first-price auction model, on the other hand, the highest bid would win the impression – meaning that the advertiser would be paying around $11.
With the transition to the first-price auction, Google AdSense will align itself with Ad Manager and Google AdMob, which are both operating under the first-price auction model already.
Some advertisers may find it easier to plan their budgets if the winning bid is the actual price they will be paying.
First-price auctions, however, mean that the winning advertiser will pay a higher price than they would with a second-price auction model if they bid the same amount.
The announcement also mentioned, “When bidders/buyers lower their bids in the first-price auction, effective payments are similar in both models, reflecting the value of the publisher’s ad inventory and audience.”
Being Google’s certified partner for a decade, we were already informed in advance of the first-price auction update so that we can inform the publishers associated with us through this blog post and our YouTube channel.
Campaign managers need to inform stakeholders regarding this update before it affects their budget or bidding strategy.
Despite the transition, Google also stated that publishers won’t see a drastic change in monthly earnings: “Due to the dynamic auction environment, we cannot accurately predict how specific AdSense publishers will be affected.”
On average, however, we expect AdSense publishers’ earnings to remain neutral as a result of the switch to the first-price auction model.
As with any major changes, Google AdSense’s move to first-price-auctions may not have been the first; however, it was a significant one for media-buying & selling in general.
We at MonetizeMore strongly believe that Google AdSense’s first-price programmatic auctions deliver a simpler No BS ecosystem for publishers to manage their ad space.
In our experience, media buyers are always looking to get the most out of every ad impression. Henceforth, it is our assurance to help publishers receive profitable shares only.
It makes sense for Google to update its approach as well, given that other platforms and exchanges have already made the change.
Additionally, while Google is expecting to see some impact, you as an AdSense buyer need to consider how you will be structuring your future bids and planning your budget.
Our PubGuru Header Bidding technology intensifies competition, pushing advertisers to be paying even higher prices for your ad inventory.
Since 2010, we have been helping publishers optimize their ad inventory, turning up the appeal for media buyers to compete for.
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Kean Graham is the CEO and founder of MonetizeMore & a pioneer in the Adtech Industry. He is the resident expert in Ad Optimization, covering areas like Adsense Optimization,GAM Management, and third-party ad network partnerships. Kean believes in the supremacy of direct publisher deals and holistic optimization as keys to effective and consistent ad revenue increases.
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