So GDN CPMs will likely increase a material amount depending on number of auction participants (IS bid lost will probably correlate with how much more you'll pay?) and this kind of gets swept under the rug. Now there isn't any safety net from overbidding, so it becomes way more important to start bids low and work up, then periodically downbid and start the process again in the event other participants have entered/exited the auction.

How long until this gets implemented on search ads? <2 years? How will it impact the bid floors & ad rank there? (Kind of rhetorical, since the answer is it will most likely drive up CPC bids and for sure increase effective CPMs. I doubt Hal Varian browses HN.) Doing away with AP and IS signaled that this was the end goal. When this happens, you'll have to rely on more frequent bid adjustments combined with both sampling the paid SERPs and the Top IS metric via Ads API if you want to squeeze out more ROI (here is a business idea for someone if Wordstream/Kensho aren't already developing something).

It is great looking at the search queries report and ~40% of your spend doesn't even have an associated query. (not provided) for organic in GA is understandable, but doing similar on paid, come on.

FAQ that's asked but not answered:

* So does this mean I'll be paying more?

Second price auctions were intended to remove "auction winner's remorse" -- it doesn't matter how much you bid, because you'll only pay the next highest bid.

So why did Google do this? "streamlining"? Oh, please.

I never have sold ads, but I've sold other things and have heard customers complain: "why can't your pricing model be easier to compare with our other vendors!" Don't you get the impression that Google has heard that too?

(Full disclosure: I was in Google AdWords 2008-2010. I did not work on the auction.)

Google's 2nd price auction started in 2003 or so and was a major factor in their success. Don't you think you ought to consider, not why it was bad, but why it lasted so long? Also, what the rationale was for it in the first place?

"Easier to compare with other vendors"?? Seriously? You were a small player, I assume, which hardly describes Google.

So I was. But AFAICT every vendor is a small player when the customer is a deep-pocketed big spender.

Second-price auction is good for advertisers, since you'll pay less than what you're willing to (e.g. if you win with a bid of $10 and the second price is $5, you'd pay $5). I get what you mean and I agree in most cases, but until now advertisers paid less than expected so it shoudn't bother that much.

Easier to compare but more expensive and more difficult to guess how much to bid, is probably not what customers are asking for.

As an advertiser I have the feeling that we will end up being charge more, finding the right price at which to bid will take us a lot of time and effort.

I am wondering if this impact search keywords advertising.

You can be certain that they ran many, many experiments to find out how much more money they'd make.

What they can't predict is how the universe of advertisers will adjust their strategies, as you said. Even less predictable is how the competitors will react.

Changing a network of this size to first price auction will have a huge impact in online advertising. A lot of strategies and algorithms will need to be reviewed to try keep up with current ROIs