Auction model

Learn how programmatic auctions work

The ad auction is used to select the ads that will appear on your pages and determine how much you’ll earn from those ads. All ads pay different amounts of money, depending on factors such as how much an advertiser has bid for the ad. The ads that win in the auction are the ones you see on your website, app, or other digital property.

The ad auction is designed to ensure that you're earning the most possible revenue for your ad space. The more advertisers that bid to appear on your pages, the higher the competition is for your inventory, and the more you can earn.

The following auction model applies to the Open Auction and in Private Auctions:

  • Ad Exchange determines the winning bidder based on the highest net bid submitted. The net bid reflects any adjustments Ad Exchange may, at its discretion, have made to the bid submitted by the buyer for the purpose of optimizing the auction. Net bid takes into account Google's revenue share.

    Regardless of whether any adjustments are made, the winning buyer will never be charged more than the bid it submits. If the respective amounts of the net bids submitted differ by a small margin, the winner among those bids may be randomly chosen.
  • The auction closing price is determined by the highest net bid in the auction.
  • To optimize the auction, Google may choose to close an auction at a price lower than the reserve price that would have otherwise been applied. In such cases, the winning buyer may pay a price below the reserve price and, therefore, receive a discount on its bid. A buyer that has received discounts on its bids may face higher reserve prices in subsequent transactions to offset such discounts.
  • Subject to the terms governing their use of Ad Exchange, sellers are paid the Ad Exchange closing price, determined by the highest net bid in the auction, but will receive no less than the CPM price they specified for the auction. Unless the "Average revenue share" setting is disabled by a seller, auction optimizations may result in an auction closing at a price lower than the reserve price that would have otherwise been applied. Because the seller will always be paid at least its specified CPM price, the seller may receive more than its contracted revenue share on the transaction. In subsequent transactions, the seller's revenue share may then be reduced to offset the prior earnings in excess of the contracted revenue share, but the seller will always receive at least its contracted revenue share across all its Ad Exchange transactions in a given month.
  • Bids on ad requests eligible for Private Auctions may compete with bids from the Open Auction either (i) concurrently if enabled by the publisher or (ii) subsequently if Private Auctions do not fill the ad requests.
  • Ad Exchange may run limited experiments designed to optimize the auction. These experiments may include modifying the standard auction model or mechanics (for example, a tiered, rather than first-price auction); simulating bid requests and auctions; modifying the CPM price set by the seller for an impression or otherwise adjusting seller settings; or discounting certain bids submitted by buyers or otherwise modifying the priority of the bids submitted by buyers. "Advertisers/Brands" and "Buyer" blocks in "Ad content" rules under Protections are not modified.
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