Second Price Auctions

Topsort's auction-based system supports both First and Second Priced Auctions.

Topsort operates on the general second-price auction principle by default.. In fact, one of our cofounders Michael Ostrovsky wrote a paper about second-price auctions that was later recognized by the Game Theory Society as the most influential paper of the decade on this topic.

How does a generalized second-price auction work?

The second-price auction is an auction model that makes it easy and safe for advertisers to bid. Instead of paying the maximum amount for an ad space (as they would in a first-price auction), advertisers pay bids higher than the next highest ad to win the auction. This gives advertisers the confidence to submit their best bids without risking overpaying for a space.

For example, in a first-price auction, if the current highest bid is $0.35 and you bid $1.00, you pay $1.00 per click regardless of the fact that the highest bid was lower. In a second-price auction, if the current highest bid is $0.35 and you bid $1.00, you would pay $0.36 per click.

Quality second-price auction models used by Google Ads, Amazon Ads, and Walmart Connect also factor in relevancy in addition to bid amounts. When “laundry detergent" is searched for, relevant products like "Tide" are more likely to win the auction and be displayed rather than Bounce® dryer sheets that were bid on the same term. Even if the dryer sheet brand had the highest bid, the more relevant products will win the auction.