The Ad Auction

Auction Types

We can support either first or second price auctions. For second price auctions, Koddi uses a GSP (Generalized Second Price) auction as our standard because:

• it generally delivers consistent results in real world application,
• nearly all other auction based ad products use a GSP auction (Facebook being the exception), and
• a GSP model is simpler, and therefore generally better understood by advertisers and those who are optimizing their campaigns.

Why not a Vickrey–Clarke–Groves (VCG) auction?

In a VCG auction, bidders submit bids that report their valuations for the items, without knowing the bids of the other bidders. The auction system assigns the items in a socially optimal manner; it charges each individual the ‘harm’ they cause to other bidders. (1)

In a GSP auction, each bidder places a bid, also without knowing the bids of the other bidders. The highest bidder gets the first slot, the second-highest, the second slot and so on, but the highest bidder only pays the minimum price necessary to beat the second-highest bidder, the second-highest pays the minimum price necessary to beat the third-highest, and so on. It is used mainly in keyword auctions, where sponsored search slots are sold on an auction basis. (2)

Over our experience running ad programs, Koddi has conducted tests on various auction and attribution models using historical data at scale in order to determine which model serves the most relevant advertiser given the information provided by the publisher and provides the most benefit to all the stakeholders in a marketplace. We have specifically investigated a VCG model, and its impact on measured KPIs were minimal when compared to a GSP model. In short, we have generally found the outcomes to be very similar between these two models.

1. https://en.wikipedia.org/wiki/Vickrey%E2%80%93Clarke%E2%80%93Groves_auction
2. https://en.wikipedia.org/wiki/Generalized_second-price_auction

Our Approach to Auction Health

The goal of the Koddi auction is to optimize auction health. Auction health is a measure on whether an auction is performing its role - enforcing rules to allocate supply to demand in a way that meets everyone’s needs. In our experience, there are four main pillars to auction health:

• Advertiser Return
• Monetization
• Fairness
• Diversity

These are further explored in the Auction Health section.

Embracing a Test and Learn Approach

Koddi Ads provides support and the tools for a wide variety of testing capabilities. From launching a virtual auction on a subset of traffic, to determining A/B test structures and holdout groups with advertisers to measure the lift in conversion the program provides. Your Koddi Ads account team will partner with you on setting up testing as needed.

A/B Testing
Our server-side integration is configured to handle A/B tests at scale and we are able to provide customizable ad-hoc reporting at the variant level to gauge performance and calculate incremental media revenue.

Incrementality
Koddi can assist you in designing holdouts/control groups for lift testing. Our system is set up well to enable you to manage and report on incrementality, and we do this with several other publishers today.