Google Ad Manager, with the aim of simplifying programmatic buying, will begin transitioning publisher inventory to a first price auction format.

This move by Google Ad Manager (formerly DoubleClick) will have broad implications for the industry, which have been pushing towards first price auctions.

During the first price auction, the buyer will pay the actual price they bid.  But during the second price auction, the winner pays the amount bid by the second place competitor.  This second price auction format initially formed the foundation of programmatic ad buying, which was mainly a way to let publishers fulfill their remnant inventory.

Because programmatic has become more complex over the years, it’s become more difficult to for both publishers and advertisers to properly value inventory.

Although Google isn’t the first to shift to a first price auction, its position in the market means it’ll make the biggest splash throughout the ecosystem as sell-side and demand-side platforms respond to the change.

“Since the change from second to first price will require both buyers and sellers to make changes in their programmatic strategies, we’ll give everyone time to prepare over the next few months before we start testing. During this time, publishers and app developers will need to rethink how they use price floors and technology partners will need to adjust how they bid for Google Ad Manager Inventory,” Google said.

In a first price auction, all programmatic buyers will compete in one auction, alongside direct-sold advertisers. Bids will not be shared with other buyers before the auction or set the price for another buyer.

This move is going to be affecting just display and video inventory sold through Google Ad Manager. It doesn’t impact auctions for Search, YouTube, AdSense for Search or other Google property inventory. Display & Video 360 advertisers don’t have to take any action.

According to Google, it will begin transitioning publisher inventory to the unified first price model in the coming month and expects the transition to complete by year-end.

Programmatic is expected to account for 86 percent of US digital display media buying by 2020, according to eMarketer.

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