Google AdSense moving to a first-price auction

Everything you should know about

Google AdSense is one of the few ad tech platforms that still operates under second-price auctions. However, that’s about to change till the end of 2021, as Google recently announced.

In this article, we’ll cover what exactly is going to change, why it’s happening, and what it means for publishers.

What’s happening?

Google will switch AdSense auctions to first-price by the end of the year in order to streamline processes and simplify how buyers purchase your inventory. The move will apply to AdSense for Content, AdSense for Video, and AdSense for Gaming. There will be no changes to AdSense for Shopping and AdSense for Search. First-price auctions are expected to “make it easier for buyers to purchase your ad space sold on AdSense”, as per Google’s announcement. But how exactly do first- and second-price auctions differ? Let’s take a look.

First-price vs second-price auctions

For quite some time, the most common way that actions for digital inventory worked was the second-price model. With that method, buyers paid whatever the second-highest bid was plus one cent. First-price auctions, on the other hand, mean that the final price would be whatever the highest bid in the auction was. This brings more transparency to the process as the so-called “ad tech tax” cannot be manipulated through the murky fee structure of second-price.

Why is Google making the change?

AdSense is one of the last remaining platforms to still be utilizing the second-price auction model and it was a matter of time for it to align with the rest of the ecosystem. The move to first-price will simplify how advertisers bid and enable them to use a unified approach across all Google platforms, including Google AdMob and Google Ad Manager

What effect will it have on publishers?

According to Google, the move to first-price should have an overall neutral impact on publisher revenues. They also shared that “When Ad Manager moved to a first-price auction, there was a neutral to slightly positive impact to publisher earnings on average.” Publishers are not expected to do anything to prepare for the switch in auction methods, as the changes will happen automatically. The early announcement by Google is meant to give advertisers more time to prepare, adapt their bidding strategies, and plan their ad spending. 

Wrap up

Google AdSense moving to the first-price auction model is a logical next step in the shift that’s happening in the ad tech ecosystem. Since most other exchanges and Google’s own platforms have already made the switch, the transition from second- to first-price in AdSense will allow for better alignment and simplification of processes. Budgeting for advertisers should become easier with greater predictability and ultimately the change is expected to grow their “spending confidence”, as Google puts it. This may bring a positive effect to publisher earnings, and, as speculated – to Google as well, which may be the true reason for the shift.