Auction Logic

1st and 2nd Price Auctions

Topsort supports both first-price and second-price auction models, offering flexibility to advertisers based on their bidding strategy. In both cases, the bid amount and the item’s quality score are considered to rank items in the auction. Once the items are ranked, the amount to pay will be determined by the bid amount used.

Topsort recommends using the first-price auction for Auto-bidding (we can run auto-bidding with 2PA too). With Auto-bidding, algorithms optimize bids in real-time, adjusting based on different signals and performance metrics, ensuring that high-quality items are ranked competitively. The transparency of a first-price auction, where the winning bidder pays their exact bid, combined with the automated adjustments based on the quality score, helps achieve efficient budget usage.

For Manual bidding, Topsort suggests using the second-price auction, where the bid amount and quality score also determine ranking, but the highest bidder only pays the second-highest bid plus a small increment. This model offers more protection for manual bidders, as it encourages competitive bidding without the risk of overpaying, thanks to the lower final price. Advertisers with high-quality items can also benefit from better placement due to the combined influence of quality score and bid, all while maintaining control over their bidding strategy.

Pacing - How Budgets Are Spent

Topsort provides a pacing mechanism that adjusts campaign spending based on marketplace traffic, ensuring that the campaign’s budget is distributed evenly throughout the day. This pacing feature helps advertisers maximize their campaign’s exposure across different times, preventing the budget from being depleted too quickly during peak hours. It smooths out the spend rate, ensuring a more representative exposure of ads, balancing impressions across low and high-traffic periods, and avoiding missed opportunities due to early budget exhaustion.

Topsort uses two different pacing mechanisms simultaneously. The first mechanism, commonly known as throttling, probabilistically excludes the campaign from participation in some fraction of auctions. The second mechanism, known as discount pacing, decreases the campaign bids accordingly to slow down the spend. Topsort’s auto-bidding algorithm intelligently combines both mechanisms to achieve optimal results.

Benefits of Pacing

1. Smoother Exposure: Pacing prevents rapid budget depletion, enabling ads to appear consistently throughout the day. This leads to more stable engagement across different times, ensuring better click distribution.
2. Increased Price Stability: Without pacing, early high competition can drive prices up, while later in the day prices could drop as budgets are exhausted. Pacing maintains stable prices throughout the day, avoiding volatile swings in auction dynamics.
3. Improved Campaign Performance: Advertisers gain more consistent visibility throughout the day, reducing the likelihood of spending the entire budget in peak hours and missing out on valuable traffic later.

Disabling Pacing

Alternatively, Topsort offers the option to deactivate pacing for advertisers who prefer more control over their budget. Without pacing, campaigns spend their budget as quickly as possible based on marketplace conditions. This can lead to greater visibility during high-traffic periods but also risks depleting the budget earlier in the day, making it suitable for time-sensitive promotions or campaigns requiring immediate exposure.

Considerations

• Budget Awareness: Advertisers with small budgets may see their campaigns aggressively paced to ensure longevity throughout the day. This could limit exposure during high-traffic moments.
• Opportunities for Adjustment: Topsort provides real-time performance insights, such as ROAS (Return on Ad Spend), to help advertisers decide if they should increase their budgets to capture additional traffic.