Second Price Auction / Advertising Terms Second Price Auction Second Price Auction is a bidding model often used in digital advertising where the highest bidder wins the auction but pays only the amount of the second-highest bid, plus a small increment. This structure is designed to encourage advertisers to bid their true maximum value, knowing they will not necessarily have to pay that full amount if they win. It is commonly used in programmatic ad platforms and real-time bidding environments such as Google Ads. In a second price auction, each participant submits a sealed bid for an available impression. The highest bidder is awarded the ad placement, but instead of paying their own bid price, they are charged just enough to beat the next-highest bid. For example, if Advertiser A bids $5.00 and Advertiser B bids $4.50, Advertiser A wins the impression but only pays slightly more than $4.50, not the full $5.00. This system balances fairness and efficiency while reducing overpayment. This auction model benefits both advertisers and platforms. Advertisers are more likely to bid honestly, which can increase competition and improve the quality of results. It also helps ensure that prices reflect actual demand. For platforms, second price auctions support better inventory management and more consistent fill rates. However, it is important to note that not all platforms use pure second price models anymore. Some have shifted toward hybrid or first price auctions, where the winning bid is what gets paid. Understanding which model is being used is essential for setting the right bidding strategy and managing return on ad spend.