Yahoo Ad Exchange: Optimizing Floors in First Price Auctions
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In this paper we outline the methodology and impact of optimizing floors in Yahoo display and video ad exchange. This marketplace uses a first price auction mechanism to allocate ads. As a result, the highest bid wins the auction and the winner pays its bid. This is different from the previously used second price auction rule, where the highest bid also wins the auction but the winner pays the maximum of the second highest bid and the floor. Our solution induces Demand Side Platforms to change their bidding behavior as a response to the floors enclosed in the bid request, helping Yahoo properties to increase their ad revenue. In June 2021, we deployed the Dynamic Floors feature to production on display ad inventory in Yahoo properties located in North-America. Afterwards, we rolled out the feature in other markets and properties, and in October 2022 we started optimizing floors on Yahoo video ad inventory. The impact of this feature is estimated at +1.3 revenue on Yahoo Display inventory, and +2.5 non-negligible numbers in a multi-million Yahoo ad business.
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