First Price Auction and Second Price Auction – basic differences
What is the First Price Auction model? We answered this question a few months ago in this post on our blog. It was shortly after Google announced the introduction of this ad sales model. Now we would like to compare the two most popular auction models and discuss the differences between them. What is Second Price Auction? Let’s start with an example. We have 3 bidders, each of them proposes the following amounts that they are willing to pay for an ad impression: The bidder – $3.00 Bidder – $3.60 Bidder – $3.30 Who of them wins? The winner will be the highest bidder 2 ($3.60), but the fee to be paid will be the second highest bid in the auction ($3.30) plus $0.01. In this example the winning bidder will pay exactly $3.31. Curiosity It is worth mentioning that the model currently called Second Price Auction,…