First Price vs. Second Price: Why InMobi's Move to First Price is Good for Buyers

InMobi Exchange is now taking steps for a complete transition to first-price auctions, and we expect to complete the move in Q3 of this year to make a gradual transition for our demand partners. While demand partners tweak their bidding strategies to adapt to this change, we believe this will create an environment for advertisers and publishers to arrive at a fair and transparent auction that benefits all players in the advertising value chain.... 

But what is the real motivation to make this shift? 

Second Price vs. First Price 

In a world where supply-side platforms (SSPs), exchanges and in some cases publishers run nested auctions under different clearing schemes, it’s important to have all demand from bidders compete on an equal footing when the final auction is conducted. 

Let’s understand this from two examples.  

Winning bidder at SSP, undeservedly, loses the publisher side auction because of second price. 

Winning bidder at SSP, deservedly, wins the publisher side auction because of second price. 

In a first-price auction, winning bids get to compete at the final auction with the actual bid price they were willing to pay for the impression. In a second-price auction, their bids can become less competitive - some might argue, unfairly - by way of the clearing logic they will encounter in the nested auctions. 

What Should Buyers Look Forward To? 

Higher win rates: Buyers will likely see improved win rates as the first-price auction mechanism eliminates the risk of being undercut by lower bids from competitors. No matter where the decision is being made, your bid at the final auction remains equal to your original bid value. 

Removes unknowns and ensures transparency into pricing: Buyers will now deterministically know what they are going to pay for an impression, without it being affected by competing bids or the clearing logic at the SSP’s end. There is no scope for hidden fees by intermediaries that may be still possible in second-price auctions. 

What Else Should InMobi’s Demand Partners Know? 

During the transition period when both first- and second-price auctions will co-exist, buyers will be able to identify the nature of auction by the “Auction Type” field in the bid request. All first-price auctions will have auction type value as 1, and second-price auctions as 2. 

We are committed to making this transition seamless for you. We will continue to share more information at every point during the transition but if you have any questions in the interim, you should reach out to your Demand Partner Manager.