Auction model

Learn how programmatic auctions work

The ad auction is used to select the ads that appear on a publisher’s properties and determine how much they 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 ad that wins is the one that the user sees on the publisher's website or app.

Ad Manager uses the following auction model for the Open Auction and Private Auction:

Ad Manager determines the winner

Ad Manager determines the winning bidder based on the highest net bid submitted. The net bid takes into account Google’s revenue share and reflects auction optimizations that account for the probability of an ad failing to serve and generate a billable impression.

The probability of an ad serving and generating a billable impression can differ among bids. To optimize for publisher revenue, Ad Manager selects the bid with the highest expected value to a publisher. 

Example
If a $10 bid has a 10% likelihood of a billable impression but a $5 bid has a 50% likelihood of a billable impression, the $5 bid is worth more to a publisher (the expected value is $5 x 50% = $2.50 minus Google’s revenue share instead of $10 x 10% = $1 minus Google’s revenue share) so the auction selects the $5 bid as the winner. Although the expected value is $2.50, when a billable event occurs, the advertiser is charged $5 and the publisher is paid $5 minus Google's revenue share.

Regardless of any optimizations, the winning buyer is never charged more than the bid it submits. If the respective amounts of the net bids submitted are the same, the winner among those bids may be randomly chosen.

Sellers are paid

Subject to the terms governing their use of Google's auction, sellers are paid the closing price, net of Google's revenue share, but receive no less than the CPM floor price they specified for the auction. Ad Manager also offers an optional Target CPM feature; when using this feature, the target CPM does not constitute a specified floor price, as the feature dynamically adjusts floor prices, and maximizes yield while aiming for average CPM on the inventory to be equal to or greater than the target CPM. Learn more about target CPM.

Optimize the auction

Ad Manager may run limited experiments designed to optimize the auction. These experiments may include:

  • modifying the standard auction model or mechanics
  • simulating ad calls and auctions
  • modifying the CPM price set by the publisher for an impression or otherwise adjusting publisher settings
  • discounting certain bids submitted by buyers or otherwise modifying the priority of the bids submitted by buyers

A buyer’s ad targeting settings are not modified.

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