• by Michael Korsunsky , Op-Ed Contributor, July 29, 2019

Soon publishers will start to see ad exchange traffic from Google Ad Manager transition from second-price to first-price auctions. All traffic will move to the new model by the end of July, and publishers should already be setting floor prices using Google’s new unified pricing rules.

The change in auction model is part of an industry-wide move to ensure transparency, which was increasingly lacking in a complex system of header bidding, sequential auctions, and questionable tactics. In addition to the change in auction mechanics, Google is also introducing a unified auction into its ad server, giving up its current last-look advantage. While the move sounds positive overall, there are bound to be those that benefit and those that lose out, and Google isn’t known for making changes to its own detriment. So, what is the long-term impact on publishers likely to be?                                                        

Revenues will rise and fall  

The initial changeover from second to first-price auctions may cause a spike in publisher revenues. If buyers and demand-side platforms (DSPs) aren’t ready for the change they will find themselves paying the full bid, rather than a little over the next highest bid as is the case with second-price auctions.

But buyers and DSPs will respond quickly to the new model and will adapt their pricing strategies accordingly. Instead of bidding high based on what they think the impression is worth they are likely to be cautious, setting their bids as low as they can get away with.   

Supply-side platforms (SSPs), and more recently DSPs, already have a temporary solution in place in the form of bid shading which bridges the gap between the two auction models. With bid shading the buyer pays a price that is somewhere between the first and second price amount. In theory bid shading should mean publishers receive a higher price than with second-price auctions, at least in the short term. But the popularity of the practice demonstrates buyers aren’t willing to pay the full first price amount, and that any revenue boost publishers see after the changes are implemented will only be short-lived. 

Dependence on Google will increase

Google’s move to a unified auction appears to remove the last-look advantage it currently enjoys. It also seems to make life simpler for publishers, reducing the need for complex yield optimization through multiple platforms and trading mechanisms. Publishers can plug partners directly into exchange bidder to compete in a single unified auction, so the move reduces the need for header bidding technologies and other intermediaries.

While this simplification of the programmatic process may be welcome news for publishers, it will significantly increase their reliance on Google. There is also speculation that once the dust settles, and header bidding begins to be phased out, Google will eventually return to second-price auctions which will have a knock-on effect on publisher revenues. Ultimately it is up to publishers whether they want to opt for the arguably simplified solution offered by Google or retain some control by continuing to sell their inventory through a more varied selection of partners.  

Quality will remain the constant goal

Publishers are getting used to weathering storms, from dealing with the rise of ad blocking to complying with a raft of data regulations. The changes in Google’s Ad Manager are just another chapter in the evolution of digital advertising that will disrupt how publishers monetize their inventory and impact their bottom line.

But there are some constants that help publishers to overcome challenges and adapt to changes, and a quest for quality is perhaps the most important. Publishers must continue their mission to offer premium, brand safe environments with high quality content and impactful ads that adapt seamlessly to both the visual design and context of the page, rather than disrupting or intruding on the user experience. There may be challenges ahead, but if publishers make quality a constant goal, their sites will remain attractive to visitors and their inventory sought after by advertisers.     

While Google’s transition to first-price, unified auctions may be complete by the end of July, it will take far longer for its full impact on publishers to be realized. Revenues will be in a state of flux for some time and publishers will need to decide how much they are willing to depend on Google for the sake of simplicity. But ultimately striving for quality in both content and advertising will help publishers weather this latest storm and lead to long-term success.