First-Price Auction

In a first-price auction, the highest bidder wins the ad inventory and pays the exact amount of their winning bid. This format requires strategic bidding by advertisers, who often underbid their true valuation to avoid overpayment. While first-price auctions yield more predictable revenue for publishers, advertisers face increased complexity in determining the optimal bid due to the lack of information about competing bids, unlike in second-price auctions.

Example

If Advertiser A bids $2.00 CPM, Advertiser B bids $3.00 CPM, and Advertiser C bids $4.00 CPM, Advertiser C wins the auction and pays the full $4.00 CPM.