What is an Ad Auction?

The Ad Auction is an automated process that determines the cost and placement of your ads on TikTok and other platforms. Advertisers create bids for each placement, competing with other advertisers to win the auction and deliver their message to people who are interested in it.

When someone searches for a keyword on a search engine, visits a website with ads or opens a social media app, the platform triggers an auction that determines which ad to show the person. This auction takes into account the user’s search intent, context of the website or app and other factors. It also evaluates the advertiser’s bid, ad relevance and quality to decide which ad will get displayed and how much you’ll pay for it.

Open auctions are the most popular way to buy advertising auctions space on social networks and search engines. These types of auctions enable advertisers to use different bidding strategies like CPM or CPC (cost per click) to ensure their ads are displayed when the users are most likely to see them. The auction system evaluates all the bids and selects the highest-ranking ad to display.

Google for example, uses auctions to determine the placement of ads on its search results pages. The auction system takes into account the number of eligible ads that match a search term, and how popular the search is to determine whether or not it should be shown in top positions. Ads that are higher ranked are typically more relevant and more likely to be clicked on.

Other platforms like Criteo and Topsort run their ad auctions differently. In the case of Criteo, they use first-price auctions based on a CPC model. The auction consists of two steps: the initial auction where all ads are evaluated and then a second auction that determines how much you will pay for each click on your ad. The final price you pay is based on the average of the auction’s outcomes.

X also runs programmatic auctions, but in an entirely different way. Our auctions are based on your targeting preferences, so your ads compete in auctions to serve to people who are interested in basketball, for example. Using our auction algorithm, we compare your ad to all the other ads that are competing in that specific auction to serve the most relevant ad to each person.

X auctions are run through an SSP (supply side platform) or a DSP (demand side platform). The SSP will communicate with the other platforms in real time to submit bids for the ad placement. This is called Real-Time Bidding (RTB). Other auctions that X may run include private marketplaces (PMP) and programmatic guaranteed (PG). These are invite-only auctions where you can access premium inventory on a direct deal between X and the partner.