[HN Gopher] Google changed ad auctions, raising prices 15%, witn...
___________________________________________________________________
Google changed ad auctions, raising prices 15%, witness says
Author : mikerg87
Score : 146 points
Date : 2023-10-09 13:20 UTC (9 hours ago)
(HTM) web link (finance.yahoo.com)
(TXT) w3m dump (finance.yahoo.com)
| jeffbee wrote:
| What is the role of "secret" in the headline? Every internal
| action of every company is secret, so it adds nothing other than
| innuendo to the article.
| sourcecodeplz wrote:
| This is for private companies. Google/Alphabet is a public
| company.
| jeffbee wrote:
| That's ... not what that means.
| hotnfresh wrote:
| If some parts of how their ad auctions work have been published
| by them, then a distinction exists.
| charcircuit wrote:
| >Google gave the second-place bidder a built-in handicap to make
| their offer more competitive
|
| What does this even mean? The way this handicap works is very
| important. What if it is just based off ad relevancy.
| pyrale wrote:
| In this kind of auction, the winner pays the runner-up bid.
| Google simply increased that bid before it was communicated to
| the winner.
|
| The only effect, as this doesn't change the bid order, is that
| Google pockets the "built-in handicap" on top of the runner-up
| bid, without telling the winner what the actual bid is.
| espadrine wrote:
| Ironically, this is reported on Yahoo!, which invented the
| practice of ad squashing that ~their journalist~ (edit: a
| Bloomberg journalist) accuses Google of:
| https://web.archive.org/web/20080827230455/http://research.y...
|
| The formula is interesting: ad selection uses bid relevance^q,
| where q is the squashing value, which is lowered when the second-
| highest bidder is likely to bid low, creating a tradeoff:
|
| > _[David Pennock] adds that squashing can significantly improve
| revenue, at the expense of advertiser and user satisfaction. As a
| result, it is necessary to set acceptable thresholds for loss of
| relevance, and then optimize revenue based on those thresholds._
| hn_throwaway_99 wrote:
| This is a Bloomberg article, reported by a Bloomberg
| journalist.
| j16sdiz wrote:
| I wonders how did this witness gain insight into that, if it is
| so secret
| pyrale wrote:
| The source quoted being an expert witness in a trial, the
| source is likely discovery.
| klyrs wrote:
| > To help eliminate that 20% between the runner-up and what the
| winner was willing to pay, Google gave the second-place bidder
| a built-in handicap to make their offer more competitive,
| Whinston said, _citing internal emails and sealed testimony by
| Google finance executive Jerry Dischler earlier in the case._
| karaterobot wrote:
| Maybe it's too early, but that article was not clear to me. Is it
| alleged that Google incorrectly stated the value of the second
| place bidder in order to make it look higher, in order to
| pressure the first place bidder to bid higher? Even that doesn't
| make much sense, so I'm missing something.
|
| > The shift sought "to raise the prices against the highest
| bidder," Whinston told Judge Amit Mehta in federal court in
| Washington... To help eliminate that 20% between the runner-up
| and what the winner was willing to pay, Google gave the second-
| place bidder a built-in handicap to make their offer more
| competitive, Whinston said... Whinston's comments Friday
| described Google's technique, called "squashing," that seeks to
| make the runner-up's bid more competitive.
|
| If they're inflating the second-place bid to be higher than the
| first-place bid, I'd wonder why that wouldn't backfire for them
| and result in the second highest bid winning a lot of the time.
| And if they didn't inflate it above the first-place bid, why
| would the winning bidder feel any pressure to increase their bid?
|
| I'm sure it all makes sense, it's just not clear to me from this
| explanation.
| Retric wrote:
| There's two common kinds of auction those with multiple rounds
| where the final bid wins and those where everyone puts in the
| maximum amount upfront and the winner pays whatever #2 bid. The
| second type is much faster but incentivizes the auction house
| to lie about the #2 bid.
|
| Google did the second type and then got caught lying about
| bids. Doing so is really tempting but also generally fraud.
| georgeg23 wrote:
| Winner pays what #2 bid + a penny more correct? (Similar to
| eBay, when done correctly)
|
| It's unclear why a penny is considered the legal adder, why
| not 15% more? If this is all disclosed in Google's terms of
| service, is it really fraud?
| theptip wrote:
| No, precisely as they said: winner pays the second place
| bid.
|
| E2a: https://en.m.wikipedia.org/wiki/Generalized_second-
| price_auc...
|
| Edit again - I stand corrected, while it is true that the
| standard implementation is as I said, seems from TFA
| Google's implementation is second-place+0.01.
| Retric wrote:
| They disclose its second place + 0.01, but the article
| says they lied and raised it by 15%.
|
| "Google's advertising auctions require the winner to pay
| only a penny more than the runner-up. In 2016, the
| company discovered that the runner-up had often bid only
| 80% of the winner's offer. To help eliminate that 20%
| between the runner-up and what the winner was willing to
| pay, Google gave the second-place bidder a built-in
| handicap to make their offer more competitive, Whinston
| said, citing internal emails and sealed testimony by
| Google finance executive Jerry Dischler earlier in the
| case."
| bryan0 wrote:
| But according to the article it was not disclosed (??)
|
| > Google's advertising auctions require the winner to pay
| only a penny more than the runner-up.
|
| > "Google has not been transparent about what they are
| doing" with pricing, Whinston said.
| doomslice wrote:
| In adtech a first price auction is also a single round.
| AlbertCory wrote:
| Since I've been in the Google meetings where experiments like
| this are discussed:
|
| It's heavily mathematical. I pity any government lawyer who has
| to make it understandable to a non-technical audience.
| pyrale wrote:
| The heavily mathematical part is the proof that goes with the
| justification for the bidding system. Explaining the merits
| of the auction or explaining what the fraud is is pretty
| easy.
| pbhjpbhj wrote:
| Surely you just give an example of an expected payment and
| then the price Google asked? Show it was 15% (give it take a
| cent) over.
|
| Google earned PS150B pa (say?) and so a pecuniary fine of
| PS39B per year should be levied (twice the extra).
| vgeek wrote:
| How much of this ties to enhanced CPC bidding (enabled by
| default, pushed by account reps as a must have)? It allows your
| bids to exceed your maximum CPC in scenarios that Google
| defines-- which, so it seems, are likely scenarios that Google
| views as having profits left on the table.
| shmoogy wrote:
| Enhanced cpc is a lot more than 15%, but they was my original
| thought as well
| iandanforth wrote:
| Correct way: Winner bids $1.00, 2nd Place bids $0.80, Winner
| pays $0.81
|
| New way: Winner bids $1.00, 2nd place bids $0.80, Google adds
| 15%* markup to 2nd bid, Winner pays $0.93.
|
| *used as example, not a verified number
| karaterobot wrote:
| Ahh okay, the missing piece is that the winner pays the
| second-highest bid, plus a penny. I can definitely see how
| this would be fraud, and how it could be justified internally
| by Google as "it's still less than they bid".
| junon wrote:
| I'm not understanding this, how can it be fraud? (Genuine
| question, I'm not insinuating anything.)
| karaterobot wrote:
| I meant that if they claimed that the winner would pay
| the runner-up bid plus a penny, and then the winner
| actually paid the runner-up bid plus a percentage, plus a
| penny, then that would be fraudulent (assuming it was not
| disclosed).
| behrlich wrote:
| The allegation is that Google profited from lying, which
| is the definition of fraud. They stole, by making someone
| pay more than they otherwise would have, through
| deception. If the deal was "you pay what you bid" then
| this would be fine, but that was not the deal.(To be
| clear, I have no idea what the deal was, I'm just
| explaining the OP)
| qingcharles wrote:
| Exactly this. You can end up with some weird situations.
| I saw one guy get a criminal conviction for this: he
| repaired elevators. He left RepairCorp where he worked
| and set up on his own. BuildingCorp continued to pay him
| for their repairs not realizing it wasn't RepairCorp. In
| the trial they stated that they were always very happy
| with his work and the price was identical to RepairCorp.
| They were pissed he had lied to them though, and the guy
| ended up getting convicted for fraud.
| [deleted]
| victor106 wrote:
| I have the same question too, say on ebay if I bid for
| something for a $1.00 but the second highest bidder was
| $.80, would i pay the $1.00 or $.80? (Its been a long
| long time I used ebay or did any bidding)
| kolinko wrote:
| You'd pay $.80 plus minimum overbid amount - so $.81 or
| $0.85 or sth like that.
| gadders wrote:
| From memory, $1 is your maximum bid, your actual cost
| would be $.81 (or whatever the increment is over 2nd
| place).
| pyrale wrote:
| Winner expects to pay runner-up bid (this is a very
| important piece, because this changes the behaviour of
| bidders). Google quotes them an incorrect bid in order to
| collect more.
| strongpigeon wrote:
| I don't think the point is that it's fraudulent, remember
| that this is in the context of the antitrust trial. I
| think the point here is that they could only do that
| since they have a monopoly.
|
| Though I'm not sure I even agree with that. It burns
| advertiser's goodwill for sure, but they advertise on
| Google because it provides them with a ROI, not because
| there is no where else. This just forces them to tweak
| their bids more.
|
| That's without weighing in on whether Google has an
| illegal monopoly on search
| Closi wrote:
| Something can be both fraudulent and an antitrust issue.
| In fact there is probably a specific type of fraud which
| is just this (at least in the UK), which is "Fraud by
| abuse of position"
|
| The UK legal definition of this would be met if a
| person/company:
|
| 1. occupies a position in which he was expected to
| safeguard, or not to act against, the financial interests
| of another person _(e.g. operates an auction to tender
| their online marketing spend?)_
|
| 2. abused that position _(e.g. by putting in fake bids,
| which only they could do because of their position?)_
|
| 3. dishonestly _(e.g. intentionally failed to disclose or
| was otherwise intentionally dishonest)_
|
| 4. intending by that abuse to make a gain/cause a loss
| _(e.g. they intended to raise profits)_
|
| The abuse may consist of an omission rather than an act
| _(e.g. number 3 can be a failure to disclose)_.
| jacurtis wrote:
| > New way: Winner bids $1.00, 2nd place bids $0.80, Google
| adds 15%* markup to 2nd bid, Winner pays $0.93.
|
| This is true. But the story gets crazier. Let's say that
| CorpA and CorpB are both bidding on the term "Valuable
| Widgets". Here is who it goes:
|
| CorpA bids $0.80
|
| CorpB bids $1.00
|
| --
|
| CorpB wins the auction, pays $0.80 + 15% = $0.92
|
| --
|
| CorpA is sad they lost and wants so they try to outbid. They
| must pay $1.00 + 15% or $1.15
|
| CorpA wins the new action, paying $1.15
|
| --
|
| CorpB needs those auctions to sell more widgets, so they now
| must pay $1.15 + 15% or $1.32
|
| It obviously goes back and forth, but as you can see, Google
| is widening the gap each time to escalate the bid up faster.
| It increases competition and raises prices. In order to win
| you can't just pay what the previous person paid, you must
| pay a premium of 15%.
|
| Now the part that is unclear is what happens if you ignore
| the winning bid price. So if CorpA has a max bid of $1.00 and
| CorpB tries to bid, they will see that they need to bid $1.15
| to win the bid, because Google is saying that is what is
| needed to win the auction, but if CorpB only bids $1.10 they
| should still win the auction at $1.10 since that is their max
| bid and CorpA is only willing to pay $1.00. So CorpB in this
| case would pay their max bid and win. But either way, google
| is artificially pushing the price up higher than it
| technically needs to be.
| fluoridation wrote:
| That doesn't sound right. If the loser can see what the
| winner bid, they'd just need to bid for $1.01 next time to
| win. They'll get charged $1.15, but their bid will be
| $1.01, which means the loser next round will see that that
| was the winning bid and they'll know to bid for $1.02, and
| so on.
| daft_pink wrote:
| Is anyone really shocked that when you tell the seller the
| maximum rate you are willing to pay that will be motivated to get
| that maximum rate when the seller is running the auction?
| [deleted]
| GeekyBear wrote:
| Just a reminder that the EU started a preliminary antitrust
| action over Google's ad business earlier this year.
|
| > Google's advertising business should be broken up, European
| Union officials said Wednesday, alleging that the tech giant's
| involvement in multiple parts of the digital advertising supply
| chain creates "inherent conflicts of interest" that risk harming
| competition.
|
| "@Google controls both sides of the #adtech market: sell & buy,"
| tweeted Margrethe Vestager, the commission's top competition
| official. "We are concerned that it may have abused its dominance
| to favour its own #AdX platform. If confirmed, this is illegal."
|
| https://www.cnn.com/2023/06/14/tech/google-eu-antitrust-ad-t...
| strongpigeon wrote:
| To be clear though, the article is talking about search ads
| which run on a separate auction. The actions you are referring
| to concern the display side where Google runs a different
| exchange with multiple sellers for the inventory.
| GeekyBear wrote:
| Sure, but if the EU is looking for evidence of Google abusing
| it's dominant position in ad tech for it's own benefit, the
| US antitrust case certainly gives them a good place to start
| looking.
| londons_explore wrote:
| At the end of the day, Google can set the price however they like
| for ads on Google Search.
|
| Previously they ran an auction. Now they have a very complex
| price-setting algorithm that has elements of an auction within
| it, but also secret factors which push bids up or down.
|
| But they're well within their rights to just roll a dice.
| jeffbee wrote:
| Seriously, nobody has a right to any particular algorithm or
| outcome. Google can rank ads first if they contain the word
| "orangutan" if that suits them. Buyers should be looking at
| their ROI, not expecting the ad platform to optimize every
| aspect of it.
| diogenes4 wrote:
| > But they're well within their rights to just roll a dice.
|
| Who said anything about rights? What does it even mean for a
| company to have rights?
| Spivak wrote:
| If Google is allowed to arbitrarily set the price of their
| ads, and they are, then any legal pricing scheme (i.e. not
| running afoul of discrimination or price gouging laws) ought
| to be fine as long as they're lying to you about it or making
| false claims.
| londons_explore wrote:
| I'm kinda surprised they don't have some human/AI combination
| that estimates how much profit you are earning from Google Ads,
| and charge most of that.
|
| The whole idea of having a price for each individual impression
| seems outdated - what businesses care about is "how much did we
| pay Google this month, and how many widgets did we sell, and
| was it worth it or should we advertise elsewhere?". Therefore,
| why bother with the middle man - just make an algorithm to
| predict exactly how much the business thinks the ads are worth.
| discmonkey wrote:
| They do have this, you can choose to bid for a target
| conversion cost (I want to pay at most $x per conversion). In
| general I find all of this pretty silly as a Google
| employee.. I don't think you can distill the complexity of
| any change down to one article. Say for example that Google
| did just raise how much advertisers paid per click across the
| board, why would that lead to billions of dollars in profit?
| I would bet that the majority of advertisers on Google
| already spend their whole budget, so that would mean that now
| they would just be getting less clicks and conversions per
| dollar of budget spend. Logically they would then move some
| of this budget to other advertising channels such as
| Facebook. Charging more per impression always has second
| order effects, but who cares about that on hackernews
| londons_explore wrote:
| Of course - pricing is a maximization game.
|
| But thats why modelling businesses has such a large
| opportunity. Some businesses will be prepared to pay more
| if you send them more conversions... Others have a fixed
| budget. Some use many platforms, and certain things might
| persuade them to move more budget to you. Some might be
| persuaded by "tricks" like handing out airmiles, vouchers
| or free stuff to the marketing team in return for ad spend.
|
| All of those things require a higher level strategy than
| just doing everything per-impression.
| [deleted]
| Rastonbury wrote:
| Replace Google with 'a monopoly' and there's the problem. The
| monopolist can and will set prices as high as they can
| jqpabc123 wrote:
| In other words, Google's advertising customers lack any real
| insight into the rates they are being charged for "personalized
| advertising".
|
| They have no choice but to take Google's word for it. It is
| effectively a "black box" and only Google is allowed to look
| inside.
| [deleted]
| seydor wrote:
| This is so obvious to everyone who has used their ad system.
|
| They get away with that because they know marketing departments
| don't care - they have ad budgets to spend. Google gives them
| enough dashboards and excuses to satisfy their bosses. It is
| still unknown which half of advertising works.
| beefield wrote:
| > This is so obvious to everyone who has used their ad
| system.
|
| This. I tried once and am still a bit confused if I
| understood it correctly. Google seemed to refuse "too low"
| bids completely for no other disclosed reason than that they
| were too low. And the UI was hellbent to make me give google
| authority to bid on my behalf on googles own ad auction.
| Like, WTF? Who on their right mind would agree to that? I'd
| very much like these folks to be my customers. I guarantee, I
| will sell you whatever (legal) you want, as long as you agree
| that I can set the price to whatever I want. It just boggles
| my mind.
| urbandw311er wrote:
| This was my reaction to it too, and that was after a few
| days diving pretty deep into it.
| danpalmer wrote:
| Ad attribution is difficult, but it's difficult everywhere
| because customer behaviour is complex. It's much easier to
| attribute digital ads sources than it is to attribute out of
| home advertising. This isn't anything Google specific.
| espadrine wrote:
| Very true. At work, our data science team had to employ
| subtle methods to truly be convinced that a particular
| offline ad channel was ineffective:
| https://medium.com/qonto-way/how-to-invest-better-in-
| acquisi...
| disgruntledphd2 wrote:
| Hey look, it's another online-first startup reinventing
| media mix modelling!
|
| (Sorry for the snark but this is a very well studied
| technique in the offline world that gets completely
| ignored by online advertisers, rather like AB testing
| gets mostly ignored by offline advertisers).
| naijaboiler wrote:
| this is true but why does Google and all other ad-sellers
| provide dashboards that pretend to make it easy
| danpalmer wrote:
| Because compared to the alternatives, they significantly
| easier.
|
| Attribution is arguably the biggest challenge in
| marketing. If you know that someone bought because of an
| ad you know you can spend more on that ad, if you know no
| one is buying from it you know not to.
|
| With almost all digital marketing there's some amount of
| tracking, not necessarily of _users_ , but of _ads_. When
| you make a sale you know which ad it came from. Now that
| 's not _perfect_ attribution, users might take a few
| views to click through, may go direct rather than
| clicking through, or may click through multiple different
| ads, but it 's pretty good.
|
| With non-digital marketing there's nearly zero
| information. Billboards, TV adverts, magazines, radio,
| even podcasts which are digital, etc. The way that
| attribution is done is based on times of day (did you get
| a spike after your TV advert aired), or it's based on
| location (did you get a spike in the area of the
| billboard). Sometimes discount codes are used for
| attribution (use code TUBE10 to save PS10 on your next
| order), but those only work for some types of product and
| users forget more often than not (yes, even with
| discounts).
|
| Marketing on Google, Facebook, affiliate marketplaces,
| etc, is all automatable, and more accurate, more precise,
| and therefore it's easier to understand marketing ROI,
| and easier to justify more spend.
| disgruntledphd2 wrote:
| Because it makes them more money.
| sixothree wrote:
| I've always kind of assumed buying more ads increases your
| search ranking. I wouldn't be surprised to find out if that's
| true at this point.
| pyrale wrote:
| > They get away with that because they know marketing
| departments don't care
|
| Even if they cared, they have no leverage.
|
| In the financial sector, any market-maker in Google's
| position would be heavily regulated, and the kind of shit
| Google pulls would land people in jail. Even without the
| market manipulation, there's no way a company like Google
| could operate without a clear separation between departments.
| The reason for that is that centuries of playing that game
| have shown that it's the only way to keep market makers
| honest.
| RandomLensman wrote:
| It's not a two-way market really, so no real market making.
| One seller auctioning things of.
| pyrale wrote:
| Google doesn't only sell their own eyeballs, they also
| are the de facto marketplace for other people to sell
| space.
| strongpigeon wrote:
| While true, this is in the context of the search monopoly
| trial. In which case they only sell their own inventory.
| londons_explore wrote:
| Google Search Ads is a much bigger business than their
| other ads products.
| xmprt wrote:
| I believe this is true in terms of the amount of money in
| the market, but do search ads actually work? I can't
| imagine them being even half as effective as banner ads
| or video ads or native ads. So why is it such a big
| business?
| londons_explore wrote:
| Search ads are valuable because when you search for "best
| laptop 2023", googles decision of what to show will have
| a big determining factor whether you buy an hp, a macbook
| or a thinkpad.
|
| Companies are prepared to hand over literally hundreds of
| dollars to persuade Google to direct you to them rather
| than a competitor.
|
| Whereas most people are fairly used to ignoring banner
| ads, and the vast majority of ads don't lead directly to
| a purchase, so they tend to be worth only a few cents at
| most.
| RandomLensman wrote:
| Is there ad space to ad space business? Interesting.
| wbl wrote:
| Society doesn't need an honest ad market. We do need honest
| security markets.
| pyrale wrote:
| Ads being the main funding source of media, it's an
| essential piece of a functioning democracy.
|
| Without decent revenue streams for quality news outlets,
| the alternative we're slowly heading to is "sponsored"
| media, with patrons such as Jeff Bezos funding papers
| like the WP, and distorting their ability to report news
| accurately, or clickbait media not contributing to news
| discovery.
| RandomLensman wrote:
| Could also try to move to expensive subscriptions and
| public funding of some sort.
| marcosdumay wrote:
| That's every advertising venue ever.
|
| The modern insight is that you should be estimating your ads
| results instead of looking into detailed proxy metrics. And all
| that they lying on their metrics means is that you'll have a
| hard time optimizing your ads there, and thus move into other,
| more friendly platforms.
|
| But, of course, I have no idea how much of this is real (it
| certainly is real to _some_ extent), and how much is propaganda
| created to fool people into spending more on ads (it certainly
| is also propaganda to _some_ extent). On some contexts, that
| estimation is incredibly hard to do correctly, and I don 't
| know if people even try it.
| Rastonbury wrote:
| This is the case for "auction" based ad platform, I don't see
| how there is anyway to ever police this especially when they
| run the auction and have full view of all bids, essentially
| letting them perfectly price discriminate. Where are customers
| gonna go? Bing?
|
| This and all the dark patterns to nudge the user to turn on "ad
| optimizations" without explaining what it does, anyone who has
| dabbled in google ads can surely attest
| jgalt212 wrote:
| > This is the case for "auction" based ad platform,
|
| Not stricly true for a second price auction. If you win the
| auction, you are know both the first and second place bid
| prices.
| jqpabc123 wrote:
| "... know both the first and second place bid prices."
|
| Really?
|
| Maybe for a public auction but done using Google's hidden
| "black box" system, how would you know that the second
| place bidder wasn't Google?
| jgalt212 wrote:
| Google bidding in its own auctions is a separate problem
| from bidders' lack of access to top of book.
| noizz wrote:
| I work with NGO (property law) and couple of months ago we were
| awarded a grant for ads, around EUR2000/mo. Initially, I was
| pretty surprised with how generous this was, but later realized
| that it's both - a way for Google to brag how much they help
| "good causes", but most importantly - to raise the ad costs for
| others.
|
| All in all - we made a few spammer operations less profitable, a
| couple wealthy assholes were angry about us helping people defend
| themselves and we brought quality traffic to the website and FB
| group. Thanks Skynet!
| urbandw311er wrote:
| Thanks for sharing this, until now I hadn't made the mental
| leap that their "benevolence" had a secondary effect of pushing
| up revenue.
| robg wrote:
| What laws did they break? I'm confused by the sudden interest in
| monopolies when the duopolies have developed over 20 years. It's
| like after Microsoft government assumed Google / Facebook and
| Google / Apple and EBay / Amazon had each other so all was good?
| dannyw wrote:
| Fraud, i.e. falsifying bid numbers.
| abofh wrote:
| So you agree none of them did well? Or you think blasting
| everyone without a point made one?
| j16sdiz wrote:
| (not OP)
|
| This behaviour (misleading the customers) should be a
| standalone crime, unrelated to the monopoly case
| wslh wrote:
| My company spent a lot (relatively to our size) of money in
| AdWords withour a correlated conversion rate. Not saying we could
| not be completely wrong but the intuition is that more
| conversions are expected.
| bpicolo wrote:
| Conversion rate, or velocity?
|
| I might expect people that click ads to have worse conversion
| that other traffic sources. The hope is that volume overcomes
| that?
| wslh wrote:
| We tried different strategies, even hired competing agencies
| targeting different locations. Obviously a common feedback
| was that we need to increase the budget. I would love to to
| that once I see good conversions. We were using AdWords since
| 2003.
| CoastalCoder wrote:
| How much history does Google retain regarding from the
| auctions?
|
| I'm wondering about discovery in any lawsuits this might
| trigger.
| AlbertCory wrote:
| The auction code was _worse_ than a Google-only black box, when I
| was in Ads. The code itself was in a "high intellectual
| property" subdirectory that most engineers could not access.
|
| There's an elaborate economic rationale for second-price
| auctions, including that they avoid "winner's remorse." Leave it
| to the late-stage "improvers" to say, "hey, we can capture some
| of that gap between first and second place!"
| marcinzm wrote:
| >There's an elaborate economic rationale for second-price
| auctions, including that they avoid "winner's remorse." Leave
| it to the late-stage "improvers" to say, "hey, we can capture
| some of that gap between first and second place!"
|
| The reason Google uses second price auctions is because first
| price auctions incentive constant bid changes. The stability
| increases the money Google makes.
|
| edit: For more context, and ignoring the whole generalized
| second price auction parts, the revenue from first and second
| price auctions is the same. In theory with optimal bidding and
| the usual assumptions of auction theory papers. The difference
| is that in a second price auction your optimal bid is
| independent of the other bidders. In a first price auction your
| optimal bid is dependent on the expected distribution of other
| bidders. In theory with all the usual auction theory
| assumptions. In reality with online auctions this meant a lot
| of churn in bids and a preference for bidding more
| conservatively. Which isn't good for advertisers or the revenue
| of the company running the auction. Second price auctions
| mostly solve this especially if you adjust the minimum auction
| price (ie: reserve price) per auction.
|
| edit2: A great way to get more money is to have advertisers
| think they're bidding in a second price auction while actually
| running something closer to a first price auction. Which is
| essentially what the article talks about.
| AlbertCory wrote:
| There's a lot of literature on auction theory. I don't get
| the sense you've read any of it, or talked to anyone who has.
|
| Ad auctions happen in microseconds. There's no possibility of
| changing your bid while it's underway.
| marcinzm wrote:
| I've been in the field for 20 years and I know the
| difference between what companies do and what theoretical
| papers say they do.
|
| As the other person said, bids repeat across multiple
| auctions on the same keyword and even in a generalized
| second price auction optimally your bids are adjusted based
| on the expected dynamics of each auction. Based on past
| information and so on. In a first price auction you'd keep
| lowering your average bid until it's on average right above
| the next bid. The next bidder would then increase their
| bids. You'd then do so as well. Etc. Etc.
| AlbertCory wrote:
| [flagged]
| marcinzm wrote:
| You're moving the goal post from not knowing auctions to
| not knowing Google. Will the next question be if I made
| the decision at Google for this approach when they were
| competing with Overture?
| AlbertCory wrote:
| [flagged]
| daveFNbuck wrote:
| They happen more than once. You'd change your bid for the
| aggregate effect of paying for many wins, not for an
| individual auction.
| AlbertCory wrote:
| They happen millions of time per day, for any single ad
| (in any case, it wasn't clear what he meant by "bid
| changes").
| [deleted]
| [deleted]
| EGreg wrote:
| That's what happens when you don't have open source and open
| protocols. I see people on HN constantly complaining but very
| little support for distributed systems, especially byzantine
| fault tolerant with proper incentives, why? Incentives are key
| to such distributed systems working, but it sounds too much
| like Web3? FTX? Or what? I guess many people don't want to see
| viable alternatives appear. So then all you can do is keep
| complaining about black boxes and secret actions.
| alt227 wrote:
| What are you talking about? Do you realistically expect all
| companies to open source all internal software in a
| capitalist market?
| RetpolineDrama wrote:
| I believe he is mocking the average HN commenter, who
| simultaneously complains about these types of opaque-black-
| box systems but attacks transparent distributed systems.
| zeruch wrote:
| That's how I interpreted it. Everyone seems to want the
| advantages of the FOSS model for general benefit, but
| want firms to have their advantages at the same time, and
| not acknowledge the inherent adversarial aspect of that.
| arthurofbabylon wrote:
| Would be great for all participants if the auction's
| dynamics were public.
| qvrjuec wrote:
| I think you're forgetting about the main participant,
| Google.
| zeroonetwothree wrote:
| Mathematically second price auctions also provide optimal
| prices to the seller.
| gorkish wrote:
| Mathematically, all fair auctions provide the same optimal
| price to the seller. It's called the Revenue Equivalence
| Theorem.
|
| Google's auction is not fair in the sense that Google is both
| the seller and the auctioneer. Squashing enters the situation
| when the second price bidder has an ad that is more likely to
| be clicked than the first price bidder and therefore has
| additional revenue potential (known only to Google) beyond
| the revenue offered by the bid. Google then assigns this
| additional expected revenue to the value of the second price
| bid and declares this to be the market value of the bid. I
| see where their argument comes from, but it's a pretty lousy
| one.
| jeffbee wrote:
| I always thought that HIP vs. rest of google3 would make a
| great case study for developer experience/productivity
| research. Fewer eyes, emergent private style guide variant,
| etc.
| moneywoes wrote:
| > There's an elaborate economic rationale for second-price
| auctions, including that they avoid "winner's remorse." Leave
| it to the late-stage "improvers" to say, "hey, we can capture
| some of that gap between first and second place!"
|
| Are there any more examples or reading around this concept?
| richdougherty wrote:
| https://en.m.wikipedia.org/wiki/Generalized_second-
| price_auc...
| gorkish wrote:
| Vickery won a Nobel prize for it, so yes.
___________________________________________________________________
(page generated 2023-10-09 23:02 UTC)