Second-Price Auction
A second-price auction is a bidding model where the highest bidder wins the impression but pays the price of the second-highest bid, often plus a small increment. This design encourages truthful bidding because buyers can submit their real maximum value without fear of systematically overpaying.
In programmatic advertising, second-price mechanics historically reduced average CPM while maintaining strong win rates. As many exchanges have shifted toward first-price auctions, bid shading emerged to recreate some of the price efficiency that second-price once provided.
Understanding legacy second-price dynamics remains useful for analyzing historical performance, negotiating private marketplace terms, and comparing clearing prices across supply paths.
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