What is a first price auction, and how does it change bidding?
Part of Supply path transparency
The short answer
A first price auction is a sealed bid auction in which the highest qualified bid wins and the winner pays exactly what it bid. Programmatic exchanges moved to it from second price auctions around 2019, when header bidding put several auctions side by side. Buyers now set bids by expected clearing prices, not by full value.
Key takeaways
- In a first price auction the winner pays its own bid; in a second price auction it paid the runner up's bid, or a cent more.
- Header bidding made publishers compare winning bids from several exchanges at once, and second price rules no longer fit that comparison.
- A first price auction makes the maximum bid the price paid, so bid caps and floors need a fresh look.
- OpenRTB marks the auction type in the at field, and a deal can override it, including with a fixed price.
What is a first price auction?
Definition
- First price auction
- The Media Rating Council's January 2026 auction standards define it in one line: bids are sealed (secret), the highest bidder wins, and the auction winner pays their bid.
In programmatic advertising the auction runs for each impression while the page loads. An exchange sends a bid request to bidders, collects the bids that arrive in time, drops those that break the seller's rules, and picks a winner. In the OpenRTB 2.6 specification (opens in a new tab), the at field holds the auction type: 1 means first price and 2 means second price plus.
Highest bid does not always mean highest price wins. IAB Tech Lab's programmatic auction definitions (opens in a new tab) note that few auctions run purely on price: directly sold campaigns may come first, and bids can be filtered for format, advertiser or frequency before price is compared. First price describes what the winner pays, not every rule that chose it.
How did second price auctions work?
Under a second price auction, the MRC's Digital Advertising Auction Transparency Standards (opens in a new tab) say, the highest bidder wins and pays the second highest bid, or a penny more. A bidder could enter what the impression was worth to it, knowing it would only pay what the nearest rival offered. OpenRTB calls the rule second price plus, for that small increment.
OpenRTB 2.6 shows the difference with its own illustration: a floor of $0.85, three bids, and what the exchange reports through the AUCTION_PRICE macro, the clearing price, and AUCTION_MIN_TO_WIN, the minimum bid needed to win. Its second price case uses the second best bid plus $0.01.
| Bid | First price: price paid | First price: minimum to win | Second price: price paid | Second price: minimum to win |
|---|---|---|---|---|
| $1.00 (wins) | $1.00 | $0.90 | $0.91 | $0.90 |
| $0.90 | Nothing, lost | $1.00 | Nothing, lost | $0.91 |
| $0.80 | Nothing, lost | $1.00 | Nothing, lost | $0.91 |
| Auction type | What the winner pays | Strength for buyers | Weakness for buyers |
|---|---|---|---|
| First price | Its own bid | The price is known when the bid is sent | Bidding full value means paying full value |
| Second price | The second highest bid, or a penny more | Bidding true value is the simple strategy | The price depends on rivals and floors the buyer may not see |
| Modified second price | An amount set by a formula with several factors | Lets the auctioneer weigh relevance or quality | The formula is custom to each auctioneer and needs disclosure |
Why did programmatic move to first price auctions?
The short answer is header bidding. Publishers used to offer unsold impressions to exchanges one at a time, a setup called the waterfall, accepting the first bid that cleared each step's floor. A 2019 working paper by Despotakis, Ravi and Sayedi, First price auctions in online display advertising (opens in a new tab), describes publishers introducing header bidding around 2014, sending the request to all exchanges at once and picking the best bid. The authors explain the move to first price as a simple consequence of that shift.
In their model, once exchanges compete side by side, they move to first price auctions to increase their expected clearing prices. The paper also records an in between step from early 2017, soft floors set by exchanges, quickly replaced by plain first price auctions because buyers could not see the soft floor values. Google's March 6, 2019 announcement, Simplifying programmatic (opens in a new tab), said a single ad can pass through a mix of auctions, with different rules, before a winning bid price is selected, making it difficult for advertisers and agencies to properly value programmatic inventory.
| Date in 2019 | What Google Ad Manager recorded |
|---|---|
| March 11 | Publisher inventory will transition to a unified first price auction, expected to be complete by the end of the year |
| June 17 | One percent of Ad Exchange traffic moved to a first price auction |
| July 1 and July 29 | Five percent, then ten percent of traffic moved |
| September 10 | Ad Exchange traffic began moving in full over a few weeks |
| October 7 | Ad Exchange traffic transitioned in full; Open Auction rules no longer available |
| December 16 | Monitoring traffic of 3 percent or less finished; all Ad Exchange traffic uses a first price auction |
The dates come from the Google Ad Manager 2019 release notes archive (opens in a new tab). Google's March announcement also said publishers would need to rethink how they use price floors.
How does a first price auction change bidding?
The bid stops being a ceiling and becomes the price. The MRC standards say a bid strategy that is ideal for a first price auction is suboptimal for a second price auction, and that if advertisers believe they are bidding into one sort of auction but are bidding into another, the auction stops working well. A maximum CPM that worked as a ceiling under second price rules is now the price paid on every won impression.
Buying platforms responded by estimating what it takes to win and bidding near that, explained in the bid shading guide. Exchanges responded with feedback. OpenRTB's AUCTION_MIN_TO_WIN macro returns the price needed to tie the winner after a loss, or the next closest bid or floor after a win. Google's Authorized Buyers OpenRTB guide (opens in a new tab) describes a minimum_bid_to_win field filled only for bids in a first price auction. Either can be blank when prices are not shared.
Five changes to a buying brief under first price rules
- State bid caps as prices you accept paying. A cap set high to win under second price rules is now paid on every won impression.
- Ask which auction type each supply source uses. The at field carries it, deals can override it, and a log sample shows what ran.
- Ask whether price feedback is shared. Without minimum to win data, bids adjust on less.
- Read win rate and price together. A falling price with a falling win rate differs from a falling price alone.
- Keep the site decision apart from the price decision. Which sites belong on the plan is a planning question; what to bid is a trading question.
How are floors applied in a first price auction?
A floor is the price below which a seller will not sell, and in a first price auction it is the lowest price a winner can pay. The OpenRTB implementation notes (opens in a new tab) list three places a seller may put floor guidance in a request: the impression through imp.bidfloor, the Video or Audio object through mincpmpersec or durfloors, and the Deal object. They also set the order a buyer should read them in.
Which floor a bidder should use, per the OpenRTB implementation notes
- Bidding on a deal ID? Use the floor guidance in that Deal object first.
- No deal floor, or bidding in the open market on video or audio? Use the floor in the Video or Audio object.
- Native or banner, or no format floor? Fall back to imp.bidfloor, in the currency named by bidfloorcur.
A deal can also change the auction. The Deal object's at field overrides the request's type, and a value of 3 means the value passed in bidfloor is the agreed upon deal price. Ad server rules can sit above the request floor: Google Ad Manager's pricing rules page (opens in a new tab) says that when two rules target overlapping inventory, the higher price applies. Hard, soft and target floors are covered in the floor price guide.
What does a first price review look like on a real plan?
Fictional example
A garden nursery reviews its auctions in Washington and Oregon
A fictional Portland nursery selling native plants and vegetable seeds runs display across 25 gardening, home and local news sites in Washington and Oregon. Its old brief still sets a high maximum CPM, written when the team bid high to win under second price rules.
The planner asks the trading desk for a log sample. Open market requests carry at set to 1, and two private marketplace deals carry their own floors in the Deal object. Winning bids now cost what was bid, so the old cap is a price, not a ceiling.
The site list stays as approved, since fit and selling paths were checked at planning. The bid instructions change: a cap the client accepts paying, a request for minimum to win feedback on each exchange, and a monthly check of deal floors against the deal sheet.
How does PlacementGraph help define what a first price bid is for?
Auction rules set what a won impression costs. Which sites deserve a bid is decided earlier.
What should a buyer ask a seller about its auction?
The MRC standards list what accredited auctioneers are expected to disclose, from auction type and reserve prices to why a bid lost. Buyers can ask the same before a deal.
Auction questions for a seller or exchange
- Which auction type applies to open market traffic, and does a deal override it?
- Where are floors set, and can an ad server rule raise the floor above the request's?
- Is minimum to win feedback sent to bidders, and when is it withheld?
- Are loss reason codes passed to the buying platform?
- Are fees taken before or after the auction, and does the reported price include them?
Frequently asked questions
Does a first price auction mean a buyer pays more for the same impression?
Not necessarily. The winner pays its own bid instead of the runner up's, so the same bid costs more than under second price rules. What a campaign pays depends on how it bids, and buyers who bid toward expected clearing prices pay close to what is needed to win.
Where can a buyer see which auction type an impression used?
In the bid request. OpenRTB's at field marks the type, 1 for first price and 2 for second price plus, with 2 as the default when absent. A deal's own at field overrides it. Ask the trading desk for a log sample that keeps the field.
Do private marketplace deals use first price auctions?
They can. A private auction deal follows the request's auction type unless its Deal object sets another. When the Deal object's at field is 3, the value in bidfloor is the agreed upon deal price, so the deal works as a fixed price arrangement, not an auction.
Are programmatic auction rules audited?
They can be. The MRC published Digital Advertising Auction Transparency Standards in January 2026, developed with the ANA, the WFA, the 4A's and IAB Tech Lab. An MRC accreditation audit is voluntary, and auctioneers seeking accreditation are assessed against the required elements.
Sources
- MRC Digital Advertising Auction Transparency Standards (opens in a new tab)Media Rating Council, January 2026
- OpenRTB 2.6 specification (opens in a new tab)IAB Tech Lab (GitHub)
- OpenRTB 2.6 implementation notes (opens in a new tab)IAB Tech Lab (GitHub)
- Programmatic Auction Definitions (opens in a new tab)IAB Tech Lab (GitHub)
- First price auctions in online display advertising (working paper) (opens in a new tab)Despotakis, Ravi and Sayedi, November 2019
- Simplifying programmatic: first price auctions for Google Ad Manager (opens in a new tab)Google Ad Manager blog, March 6, 2019
- 2019 Google Ad Manager releases archive (opens in a new tab)Google Ad Manager Help
- Pricing rules (opens in a new tab)Google Ad Manager Help
- OpenRTB Integration (Authorized Buyers real-time bidding) (opens in a new tab)Google for Developers
Researched and written by PlacementGraph Research. Read how we research, source and update these pages. Corrections: diana@placementgraph.com.