First price auction

Creating a fair and transparent marketplace for programmatic advertising

Over the last several years programmatic advertising has evolved into a complex marketplace with different auction rules and stages. Until recent years, publishers used one auction to sell their ad inventory. Today, however, there are multiple auctions through which ad inventory can pass through before an ad reaches the user. This shift has made it harder for ad buyers, such as advertisers, agencies, and demand side platforms (DSPs) to accurately value the mobile ad supply on which they bid. For publishers, it has also led to them creating complicated monetization set-ups that take time and effort to manage.

In order to create a transparent market for all, we are excited to announce that Unity’s Unified Auction has fully transitioned from a second price auction to a first price auction as of June 1, 2021.

Understanding auction pricing

Second price auction

A second price auction is when the ad buyer pays $0.01 more than the second highest bid for an ad impression. For example, three buyers participate in the auction (A, B, C). Each of the buyer sets a price of how much they are going to pay for 1000 ad impressions: 

 

  1. Buyer A = $2
  2. Buyer B = $4
  3. Buyer C = $3

The highest bid in this auction is $4. Buyer B wins the auction but will only pay $3.01 ($3+ $0.01) for each 1000 ad impressions. 

This is a simplified example and not representative of actual prices.

There are lots of inconsistencies in how different ad exchanges manage auctions, which has made it difficult for publishers, advertisers, and DSPs to optimize their ad strategies to increase revenue opportunities.

First price auction

In a first price auction, all programmatic advertising buyers will have the opportunity to bid and pay the value they decide for an impression. 

Switching to a first price auction provides several benefits across the ecosystem participants:

  • It reduces the complexity of the auction process
  • It creates a simple and more transparent auction process for all involved
  • It makes it easier to evaluate the value of a publishers ad inventory

 

Unity's DSPs and first price auction

All of Unity’s DSP partners are now bidding via first price in Unity’s Unified Auction. This shift is aligned with all other major ad networks in the ad tech industry. Over the past few months we have been working with our DSPs to test and slowly roll out this shift to all involved in our auction. 

In support of our user-first commitment this move offers fair and transparent opportunities for everyone who interacts in our exchange and aligns our auction mechanics to those that are common industry practice. We are excited about the benefits this shift brings to our programmatic partners and will continue to evolve and grow with the rest of the ad ecosystem.

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