12 Programmatic Market Experts Comment Google’s Switch to First-Price Auction

As a publishers’ revenue-optimization company, we asked a few publishers, media agencies and Ad Tech providers one general question:

How do you think Google’s switch to a first-price auction model will influence the programmatic market?

We received many answers, and you might be surprised at the range of responses. Some expressed concerns due to the switch. Others are looking enthusiastically into the future.

Yieldbird is looking forward to the future with enthusiasm and positivity. Although many things will change in programmatic this year, we are confident that there is a lot to be gained after the initial frenzy calms down. Those who gain knowledge and prepare themselves early enough are the ones who will sustain their position in the market.

Yieldbird has shared its expertise and insights into what the programmatic reality will look like after Google’s switch to the first-price auction. There’s much to be learned.

I think it’s going to be a little messy the first couple of months. I expect inflated CPM for a while, but it shouldn’t be a long-term effect. On the other hand, there’s potential this change will bring a negative impact (like bid shading). It is a massive change, and everyone has to be ready to control this incoming ball of fire, as it’s too easy to get burnt.

That said, I’m always very curious to see how the industry reacts to a change of such scale. There’s going to be a lot of coverage, ‘best practices’, and guides, therefore it is essential to have a trustworthy partner during this process. Otherwise, it’ll be too easy to get lost in the sea of information.

Arnas Levickas

Product Owner

I expect a rise in CPMs similar to previous shifts to first-price bidding. Demand-side bid shading may counteract this a bit in some form or another, but I have my doubts about that practice being universally adopted.

This will probably not be noticeable at a glance before Google is towards the end of its transition, committing a larger proportion of its applicable traffic to a first-price auction.

Dependent on timing, this might partially counteract summer-season discounting (irrespective of lowered floors on the publisher’s side). Later on in the year, I expect CPMs of affected inventory to stabilize at new levels that should describe the perceived market value of these impressions.

Jordy Hofhuis

Programmatic Solutions Specialist

I expect that Google’s move to first-price auctions, paired with privacy changes in the Chrome browser, will result in a sharp increase in the share of advertising transactions going through Google’s pipes.

The Google Ad Manager (GAM) change to first-price auctions will result in less client-side header-bidding activity, since real-time bids will no longer be needed to provide competition in the GAM second-price auction and because client-side header-bidding requests add page latency. 

This may result in the merging of non-Google exchanges and some of the smaller exchanges leaving the industry.  Google’s changes to the privacy rules in the number one browser, Chrome, will make the entire industry more dependent on the Google cookie, which is first-party and more stable than an individual brand’s cookie since Google touches the user far more often.   

These changes should help Google consolidate its buy-side market share. It’s unclear if these changes will be positive for the sell-side, both near-term and long-term.

Matt Kyme

Senior Manager, Ad Operations

I believe that this change will cause only positive effects. As we know, most of the SSP tech providers already function in the first-price model. Google, as a hegemon against the rules of open competition, claimed the right to the so-called last look.

Unification of principles for all market participants should bring a raise, as well as a realignment, of inventory prices on the whole open market. As a publisher’s representative, I’m truly excited about it. The possibility of the biggest advertisers beating their smaller competitors with high prices will disappear now. Finally, the whole market will start to function with rules equal for everyone taking part.

Krzysztof Lechowicz

Head of Programmatic

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Implementation of the first-price auction is a step towards clarity and realignment of prices on the programmatic market. Advertisers’ bids will finally reflect real demand on the market, as well as an actual price the advertisers are willing to pay for an impression. This solution will enable better comparisons to other sales channels, like preferred deals.

On the other hand, first-price auctions will make it impossible to buy for the price lower than declared in the buyer’s bid, like in Vickrey’s model. This way of bidding surely will force advertisers to greater caution when this model is put into place; however, it won’t last longer than a couple of weeks because the change of the auction model has been announced early enough. It gives users of the system a lot of time to adjust their buying strategies.

Kamil Mońko

Sales Manager

In an ever-evolving ecosystem as programmatic advertising, transparency and efficiency are not only expected, they are constantly challenged cross-industry. As a main player in the market, we believe that the first-price auction move will bring clearer and simpler steps into place that in the long-term will contribute to increasing the industry’s sustainability.

Nênci Obregon

Digital Ad Operations & Programmatic

First-price auctions by Google will definitely help to unite auction models across platforms. This will give publishers a clear picture of their position on the market. While revenue and eCPM may temporarily decrease, we believe the overall impact will be positive in the long run. We also believe that YieldBird, as our trusted partner, is the right choice for this complex change management.

František Kosír

Yield management specialist

We see Google’s shift to first-price as a positive, as it makes the market a lot more uniform and is a validation of the changes we started to make towards the end of 2017.

Both buyers and publishers alike benefit, as it drives competition in the marketplace, helps consolidate, and makes the supply chain more transparent. First-price auctions are truly the only way to make auctions transparent to buyers in a header-bidding environment, and we’re thrilled the majority of the market has made the shift.

Joerg Vogelsang

Managing Director – DACH, Central & Eastern Europe (CEE)

Google’s shift to the first-price auction may be problematic from the buyers’ perspective. Since implementing this change, advertisers will have to radically modify their approach to bidding and planning. Buyers who won’t react quickly enough will overpay for their impressions.

However, there are two factors that will ease the effects of the first-price auction switch.

1. Many DSPs were already testing alternative solutions (e.g. header bidding). This was done in order to maximize their effectiveness and to increase their competitiveness. It caused rapprochement of bids to the second-price auction rates.
2. An increased number of auctions and competition created by header bidding caused a rise in CPM rates. It may have led to a situation when the two highest bidders had similar rates.

In the long run, we expect first-price to turn out valuable for the programmatic market. It will increase clarity as well as eliminate possibilities of manipulating auctions.

As MediaCom, we are not afraid of Google’s shift to first-price auctions. We focus mostly on emission with the usage of deals with publishers that mostly operate on preferred deals with fixed rates. Private auction deals are not foreign to us, due to monitoring and day-by-day optimization.

Krzysztof Szymanczak

Programmatic Supervisor

When Google announced that it would switch to first-price auctions, everybody on the market braced themselves.

However, first-price was set up by other AdTech companies not so long ago, and DV 360 is the latest to turn down this path.

In fact, nobody is as affected as harshly as forecasts predicted. Of course, like every change, we need to adapt to a new environment and face slightly larger prices and competition – that’s a fact. But looking to the future, first-price auctions give us more opportunities than threats. First-price auction:

• Is a unified, therefore equal, model for all market entities.
• Increases the importance of premium inventory.
• Is a more transparent analysis of bidding.

Digital Resolution specialists closely follow and react to the upcoming changes, so we reduce the price change threat to a minimum and use this change as an advantage.

Maciej Fronczak

Programmatic Manager

Google isn’t the first entity to implement the first-price auction model, so the switch doesn’t come as a big surprise. I’ve been hearing for some time now that it may cause an increase in eCPM rates. In my opinion, during the first days after a full introduction of a new auction model, it is very likely to occur.

I expect it to happen due to the delayed reaction of most market participants. Everyone will have to adapt to this new reality. However, shortly after implementation, the rates will begin lowering. Agencies and advertisers will notice that they’re overpaying and will adjust their bids accordingly. The first-price auction is undoubtedly favorable to publishers selling their inventory in RTB.

As for buyers, the situation isn’t as clear. On one hand, it is more transparent because the price is known (bid rate = price paid). On the other hand, it will become much harder to estimate real buying potential, at least in the beginning. It is very probable that advertisers will behave cautiously when bidding to avoid overpaying.

Jan Piotrowski

Head of Programmatic Buying

Implementation of first-price auctions gives Google an even better leader position. Now, each auction will promote publishers that use its Ad Manager system. Google will decide which exact SSP and publisher will sell an impression.

For agencies/media houses, the change is less favorable—it can cause an increase in CPM rates. In effect, the workload of those leading campaigns will increase as well in order to avoid exceeding CPM rates from their media plans. The general conclusion: Google’s monopoly grows, however, the possibility of publishers and buyers interference in budget steering mechanics decreases.

Konrad Sochan

Programmatic and Technology Manager

There are as many opinions as there are voices. Although all the comments gathered here vary from each other, they were all offered by experts with a great experience.

If there’s anything we can agree on, it’s that whatever happens will surely be exciting!