The Impact of First Price Auction on Open Bidding
After the introduction of the First Price model auction, EBDA revenue was reduced with a parallel rate increase. This was due to the First Price auction mechanism, which forced those purchasing through EBDA to bid at a higher price in order to have a chance of winning the impression. The balance was established in the middle, i.e. EBDA revenues dropped by an average of 23% month on month, whereas the rate increased by 25% on average.
Additionally, we have observed a 30% decrease in the share of EBDA revenues in total monetization. The average share value decreased from 15% before the First Price auction to 10% after the introduction of the First Price auction.
Platform reactions
The same mechanism that we see in the above charts is visible on every platform – a decrease in revenues from this source, with an increase in eCPM. The mechanism is both consistent and repeatable. The charts showing Openx, Pubmatic and Index Exchange performance indicate an identical response to the new conditions of each platform. Only in the case of Rubicon can we see stable revenues following the introduction of First Price until December, and a decrease only from January. Revenues from Rubicon dropped in October only, that is, immediately after the introduction of First Price. As in the case of other platforms, the rate has increased. It is possible that Rubicon has adopted a strategy that has allowed it to keep spending through EBDA at a constant level; a strategy that has allowed it to bid more effectively and win auctions.
The mechanism
With the First Price auction, the bid is won by the bidder who has bid the highest rate and they must pay at that rate. In the Second Price auction, the winning bidder pays the second highest rate. In the Second Price auction, platforms bidding on behalf of EBDA bid against this lower rate and have a better chance of winning. In the First Price auction, they must bid against the highest price, which is why EBDA bidders are in a situation where it is more difficult for them to win the impression. For this reason, we have been observing an increase in EBDA’s eCPM, and at the same time a decrease in the share in overall revenues. We can see here a significant strengthening of bidding positions from ADX. We have also observed an increase in the share of ADX revenues after transferring to the First Price auction. For more information read what First Price auctions have changed for Publishers.
The way forward
In view of the situation in which ADX remains the main source of monetization, and given the fact that its role is strengthening, it is worth looking for additional methods to monetize the site. And it is worth doing so for the purpose of securing and stabilizing the revenues, and also so as to find the most effective methods for monetization. Undoubtedly, Open Bidding is part of the diversification of revenue sources; and although its role has weakened in its entirety, it remains worth having. Further exploration of new technologies and demand sources may help improve monetization performance and secure revenues. For more information, please contact Yieldbird team.
Customer Performance Analyst
