Ad Manager Is Moving to a First-Price Auction

What was announced

Google announced this week that Ad Manager, its platform for selling ad space on websites, will move to a unified first-price auction later this year.

Ad Manager is what DoubleClick for Publishers became last year. It sits behind the ads on a great many sites, including small ones whose ads are run by a partner.

The announcement sets a direction rather than a date. Nothing changes today, and nothing a small publisher does this week will alter what happens.

It does change how some settings should be read once it arrives, which is worth understanding now rather than in the week it lands.

Second price, in plain terms

Ad Manager's own exchange has run second-price auctions until now.

Interested buyers bid while the page loads. The highest bid wins, but the winner pays only slightly more than the second-highest bid, not what it offered.

Many online auctions for goods work the same way, which is why bidding your true maximum is safe there: you rarely pay it.

For a site, the effect is that the price of each ad depends on the runner-up as much as on the winner.

First price, and what unified means

In a first-price auction the highest bid still wins, and the winner pays exactly what it bid.

Unified means the different sources of bids that now reach Ad Manager in stages, under different rules, will compete together in one auction under one rule.

Several other exchanges have made the same move over the last two years. Header bidding, where several exchanges are asked for bids at once, made a mixture of rules increasingly awkward.

What changes and what does not

• The price paid becomes the winning bid itself.
• Buyers' bidding adjusts, since bidding their maximum now costs their maximum.
• Floor prices decide who competes rather than what the winner pays.
• Reports from before and after the switch will not compare neatly.
• Your pages and placements are untouched by the auction itself.

The second is the one that makes early results misleading. Buyers' software learns to bid closer to what it expects is needed to win, and that learning takes time to settle.

Why floor prices need revisiting

A floor price is the lowest bid a site will accept for a piece of ad space. Below it, the space goes to another option or stays unsold.

In a second-price auction a floor does two jobs. It keeps out low bids, and when only one buyer clears it, the floor sets what that buyer pays.

In a first-price auction the second job disappears. The winner pays its own bid whatever the floor says, so the floor only decides which bids are allowed in.

A floor set high to squeeze more out of the old auction may simply turn buyers away under the new one. No floor can be judged until buyers have adjusted.

A worked example

A regional hiking guide, run alongside an outdoor equipment shop, carries ads on its trail pages. A partner manages them in Ad Manager for a group of small sites.

The owner read about the announcement and reached a reasonable-sounding conclusion: if buyers will pay what they bid, raise the floors and collect more.

The partner explained why that runs backwards. Buyers will adjust their bids to the new rules, and a higher floor will mostly decide who may compete, not what anyone pays.

So the owner changed nothing. The current settings went into a short written note, the past year's monthly reports were saved, and the partner agreed to say when the switch had happened.

A review went into the calendar for several weeks after that date. The decision about floors moved to a point when there would be evidence to make it with.

What not to do

The weeks after an announcement are when most hasty adjustments get made.

Do not change floors before the switch. The old auction is still running, and you would be tuning it for rules that do not apply yet.

Do not change partners because someone promises the new auction will suit their platform better. The same auction applies to everyone selling through Ad Manager.

And do not add more ads to each page to make up for anything. Chrome already filters ads on sites that fail the Better Ads Standards, and heavier pages cost readers.

What to record now

The useful work now is record-keeping.

Write down the floors currently set, which partners compete for your space, and how your placements are arranged.

Keep your own copy of the past year's monthly reports, so later months can be compared with the same months before.

If a partner runs your ads, ask three things: what they plan to change and when, how they will tell you the switch has happened, and how they will review floors afterwards.

And confirm your ads.txt file lists every current partner. A change in how buyers bid is a poor moment for some of them to be unable to verify your space.

Reading the results afterwards

The first days after the switch will be noisy. Buyers will still be adjusting, and a good or bad week tells you little.

Judge it over weeks, against the same months last year, by what the site earned in total rather than by the price of individual impressions.

Price and the share of space that sells tend to move in opposite directions when floors change, so either one alone can make a poor decision look good.

Then review floors one placement at a time, not all at once.

The counter-case

For many small sites, this change will pass almost unnoticed.

A site whose ads are handled entirely by a partner, with no floors of its own, has nothing to adjust. The owner's job is to ask the questions above and keep the answers.

A site with modest traffic may struggle to see any effect at all, since small figures wander from month to month for reasons that have nothing to do with auctions.

None of that makes the record-keeping wasted. It is the only way to know afterwards whether anything changed.

Understand the change now, keep records, and leave decisions about floors until there is evidence.

Before the switch

1. Read your partner's summary of the change.
2. Write down current floors and placements.
3. Save the past year's monthly reports.
4. Check ads.txt lists every current partner.
5. Ask your partner how they will handle it.
6. Leave floors unchanged until it is live.
7. Book a review several weeks after the switch.

Step six is the hardest to follow, because changing something feels like responding. Under rules that do not apply yet, it is guessing.

Making sure buyers can verify your space before any of this happens is covered in the ads.txt file on a site that shows ads.

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