What’s Changing: Walmart has officially announced plans to switch its advertising platform from a first-price auction to a second-price auction.
What’s the Difference Between a First-price Auction and a Second-Price Auction?
In a first-price auction, advertisers submit the highest price they are willing to pay for an impression (the highest bid).
Advertisers do not know the amount other advertisers are also bidding on the same impression.
In a first-price auction, when the advertiser wins a bid they are charged the amount that was submitted as their highest bid regardless of whatever the next highest bid was.
In a second-price auction, there is one key difference – advertisers might not necessarily have to pay the highest amount they said they were willing to pay.
In second-price auctions, the highest relevant bidder is still the winner and will typically only have to pay a small amount over the next best bid.
Why Walmart’s Second-Price Auction is Unique
Walmart is slightly altering how they treat second-price auctions.
Walmart will consider the strength of an item’s relevance for a given search in addition to calculating price based on bid amounts.
If an item with a winning bid is considered relevant for a customer’s search, advertisers are likely going to pay less than if they had won a bid and had less relevancy. Overall – the more relevant your product and ad are to a customer’s search, the less you will likely pay for the bid.
This slight alteration reduces risk of overpaying and could potentially reduce overall advertising costs. It also shows just how much focus Walmart is placing on product relevance in the customer and advertising experience.
Product relevance will also contribute to advertisement positioning on Walmart
Expand Your Advertising Strategy
There is much more to come for Walmart.
Selling successfully on Walmart is a key way to differentiate your business and diversify your marketplace presence.
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Keep an eye out for more updates and content concerning Walmart – there is more on the way!