How do auctions work in Topsort?

Topsort operates on the general second-price auction principle. 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.

Vendors and brands can bid to have their product become “sponsored” or appear as a banner ad on the marketplace platform. These promotions will gain much higher impression counts through visibility and have the opportunity to increase sales revenue.

Vndors who “lose” the auction by bidding a lower value, will win the second-most optimal listing location. Our auction-based native ads are dynamic and reset with every page load. Depending on page traffic, there could be thousands of auctions per second or just a few times a day. Vendors can track the number of auctions that they “win” through the number of impressions.

The more each vendor bids, the more likely they are to win the auctions for premium locations. Their bid should take into account: the benefits of increased visibility, the number of clicks leading to sales, and the cost of paying for those clicks.

Whether a vendor outbids their competition by a landslide or by a little, our system will automatically calculate their payment to be the smallest amount needed. All bidding takes place on the vendor side of the platform and is very simple to execute.

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At a high level, the winner of the auction will be calculated based on this calculation: Total Score = Quality Score x CPC bid (although in some cases we will apply additional adjustments and guardrails).

In this way, it is not the vendors who simply pay the most who will win the auction. The product listings must also be of sufficiently good quality with regards to an estimated predicted click-through rate. For some marketplaces, we can also incorporate the marketplace’s own relevance metrics in the Quality Score calculation.


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