Legion Post 248

West Tampa Memorial American Legion Post 248

What is an Advertising Auction?

An advertising auction is a real-time bidding process that determines who gets to show their ads to users on a search engine results page (SERP), website, or social media platform. It’s one of the key components of programmatic ad buying and selling that can be used to automate insertion orders, optimize ad inventory, and increase fill rates.

Traditionally, the way that advertisers bid to show their ads has been via what’s known as a waterfall approach. This is where ad space is offered to a priority advertiser or network first, and if they don’t take it then the space goes to the next in line, and so on. This has been a standard model in the industry for many years and it’s important to understand how this works in order to make informed decisions about the bidding and optimization strategies you use to maximize your TikTok campaign performance.

In an ad auction, bids are submitted by advertiser’s through their DSP or Demand Side Platform and then sent to the publisher’s SSP or Supply Side Platform to be executed in real-time. The SSP then conducts a real-time auction and decides whose ad to show, based on the criteria defined by the advertiser in their campaign setup. The ad that has the highest bid wins and is displayed on the website, search engine results page (SERP), or social media platform.

The actual cost-per-impression (CPI) of winning an auction is determined by the ad’s Ad Rank score, which is based on factors like bid amount, ad relevance, and user engagement signals. This ensures that businesses of all sizes compete fairly and doesn’t penalize them for low budgets by only selecting them when they’re at the top of the auction.

Different types of ad auctions exist to meet the needs and objectives of a variety of advertisers. Open auctions, private marketplaces (PMPs), preferred deals, and programmatic guaranteed auctions all provide advertisers with different functionality and capabilities to maximize the return on their investment in ad space.

In addition to the different ad auction models, there are also various bidding algorithms that can be utilized when setting up an ad server. These include first-price auctions, second-price auctions, and auction logic based on a combination of factors. When deciding on a bidding algorithm for your ad server, it’s important to consider your pricing model and whether you want to be able to automatically optimize revenue or prioritize volume with lottery selection. An automated bid strategy is ideal for maximizing revenue, while lotteries are good for when you want to guarantee a set number of impressions.