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0 pointserehweb4y ago0 comments

What do you think about platforms moving to first price auctions? Do you think we'll start to see more of that?

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3 comments · 1 top-level

andrewyates20204y ago· 2 in thread

We already see some of this. I like the admission that there is no magic happening with GSP but I don't think FPA will work for most cases:

1) GSP doesn't promise any specific price. FPA promises "the price you bid." If that's not what people are paying by simple math, it will be confusing. That hurts trust. This could happen if you have a user quality control system that penalizes poor quality. GSP gives you a second control (price) in combination with delivery volume and placement to manage user experience.

2) People expect GSP. Claiming FPA is an admission that you need to build an autobidder system versus letting people discover this for themselves.

disgruntledphd24y ago

FPA is the devil, I'm pretty sure that the only reason Google implemented it is that they needed to juice their revenue numbers.

Like, the trouble with FPA is that it extracts "too much" money from the bidder, as they pay their marginal cost. GSP (second price more generally) does have the nice property that you'll always pay less than your maximum bid, which is the margin (assuming you're bidding your maximum profitable LTV).

Also, congratulations Andrew, I'm sure you guys are gonna do incredibly well (and if you have problems in this space, I strongly recommend giving promoted.ai a look).

andrewyates20204y ago

Gsp does NOT have this dominant strategy property! People think it does which ironically makes it much better at “extracting value.” non repeated second price auction has this property. Gsp will almost always overprice just like fpa except in very unrealistic situations

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