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Does PubMatic support first-price auctions?

As of January 1, 2018, PubMatic rolled out support for first-price auctions in upstream/multi-level auctions (i.e. header bidding). All tag based integrations (i.e. waterfall) will continue to close on a modified second-price auction. For additional information clients should contact their PubMatic account manager.

How will PubMatic support first-price auctions?

The default transaction type for upstream/multi-level auctions is first-price, where auctions close at the bid price. DSPs can elect to have PubMatic employ its proprietary bid shading technology on their account which uses machine learning to determine the best price, below the bid price, for winning auctions (more information below). DSPs wanting to enable this feature should contact their PubMatic account manager.

PubMatic will utilize the top-level bid request object “at” (auction type), defined in the OpenRTB API Spec, in the bid stream when signaling to DSPs how an auction will close.

atinteger; default 2Auction type, where 1 = First-price, 2 = Second-price Plus. Exchange-specific auction types can be defined using values greater than 500.

PubMatic will signal to DSPs if there is an upstream/multi-level auction where PubMatic does not control the final decision (i.e. header bidding integrations where the final auction is closed within a publisher’s ad server); or if it’s a tag-based auction (i.e. waterfall integration where PubMatic closes the final auction). PubMatic will utilize the object source “fd”, available as part of the OpenRTB 2.5 API Spec, to communicate this parameter.

fdinteger; recommendedEntity responsible for the final impression sale decision, where 0 = exchange, 1 = upstream source.

How will this impact publishers and DSPs working with PubMatic?

PubMatic will utilize the “at” and “fd” flags in the bid steam to the signal auction type and the location of the final auction decision. DSPs will now have the ability to set appropriate bid strategies based on the type of auction they are participating in through the “at” and “fd” object source in the bid stream. The will allow DSP to submit their most competitive bids for impressions and help increase win rates. Publisher will receive first-price data, except in instances where a DSPs is using PubMatic’s bid shading. This will help publishers streamline their auctions and help them receive the most competitive bids from DSPs using equivalent biding strategies (i.e. first-price vs first-price).

How will the “at” object be passed to DSPs?

DSPs can participate in first-price auctions where the closing price is equal to the bid price, without PubMatic’s bid shading technology employed. Auctions closing at a DSP’s first-price bid will receive the object “at=1” in the bid stream.

DSPs can opt-in to first-price auctions with PubMatic’s bid shading enabled. Auctions closing below a DSP’s first-price bid will NOT receive the object “at” in the bid stream. Not passing the “at” object in a bidstream is equivalent to the “at=2” object and signals an auction will be closed below the bid price because of bid shading or closing on a modified second price. DSPs can contact their account manager to request to have bid shading enabled on their account.

DSP Enable on First-price (FP)

Bid Shading

Not Enabled

AT=1 | PubMatic closes the auction at DSP bid price.

Bid Shading 


AT=Null | PubMatic closes the auction lower than DSP bid price.


DSP Enable on Second-price (SP)

Bid Shading

Not Enabled

AT=Null | PubMatic closes the auction lower than DSP bid price.

How does “Bid Shading” impact DSP bid price in a first-price auction?

PubMatic has built a proprietary bid shading technology which is available, upon request, to all DSPs participating in first-price auctions; the effect is that the closing price charged will be less than first-price wherever feasible. PubMatic’s bid shading technology is driven by Machine Learning and optimizes overall win rate in the wrapper auction while reducing bid price for DSPs. DSPs can work with their PubMatic account managers for enabling this feature and setting the appropriate bid shading strategy.

Support for first-price, in multi-level auctions, adds transparency and benefits the programmatic ecosystem.

Inconsistency and lack of transparency among SSPs and exchanges on the auction types used in multi-level auctions have created an environment where buyers do not have visibility into whether auctions are being closed at first-price or second-price. This makes it difficult for buyers to set biding strategies that allows them to both maintain access to impressions and maximizes spend consistently. This scenario is serving to slow the growth of programmatic advertising, adversely impacting both publishers and advertisers. By signaling to buyers, in a transparent way leveraging OpenRTB standards, what type of auction they’re competing in, PubMatic is helping to add transparency to the programmatic landscape.