Glossaryprogrammatic advertisingauction mechanisms

Second-Price Auction

second-price auctionVickrey auctionbidding strategyimpression pricingauction type

Also known as: Vickrey auction

A second-price auction is an auction format in which the highest bidder wins but pays a price equal to the second-highest bid plus $0.01 — not their own submitted bid. This mechanism has been widely applied in programmatic advertising, where ad impressions are bought and sold in real-time auctions.

The practical effect is straightforward: an advertiser can bid aggressively to maximize their chances of winning an impression, yet they will only be charged marginally above what the next-highest competitor was willing to pay. This creates an incentive for bidders to submit their true valuation rather than strategically underbidding, since overbidding carries no extra cost and underbidding risks losing the impression entirely.

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