Why did Walmart Connect Move to a Second-Price Auction?

Yesterday Walmart implemented their advanced second-price auction model for Walmart Sponsored Products and Search Brand Amplifier advertising. Walmart Connect’s advertising partners have consistently voiced their preference for a more efficient, second-price auction. A second-price auction is an industry-standard model that is more advertiser-friendly than the first-price format. In a first-price auction, there is always a risk that you are overpaying for your winning bid- this requires more manual oversight and frequent bid testing to find the cheapest winning bid.

A second-price auction favors the advertiser, allowing them to set their maximum bid while feeling confident that, in many cases, they will pay less than that maximum bid. It delivers more efficiency from a management standpoint, as well as a CPC and RoAS perspective.

Breaking Down Second-Price Auction

Walmart is transitioning from a first-price auction to an advanced second-price auction.

First-price auction: In a first-price auction, if an advertiser wins a bid, they pay the exact amount that they bid.

Second-price auction: In a second-price auction, if an advertiser wins a bid, they pay 1 cent higher than the second-highest bidder.

Advanced second-price auction: Walmart is introducing what they are calling an advanced second-price auction where the highest and most relevant bidder wins the auction. In Walmart’s advanced second-price auction, they run a real-time auction that considers your bid price and relevancy to decide what you end up paying and where your ads are positioned. So, if you win the bid, chances are you will not pay just $0.01 higher than the second-highest bidder, but a calculated amount between your max bid and the second-ranked bid within your relevancy threshold.

What Implications Does Second-Price Auction Have for Walmart Advertisers?

On Campaign Management: Campaign managers should be excited for the change as the move to second-price auction should reduce the level of manual intervention needed to monitor winning bids.

On Performance: Advertisers may see a decrease in their average CPC which would likely benefit their campaign RoAS. A reduction in average CPC could lead to potential increases in clicks and impressions as campaigns that are limited by budget are able to extend their run time longer throughout the day.

How Does our Brand Succeed in a Second-Price Auction on Walmart.com? What Actions Should we Take?

There are no significant changes you need to make in how you are currently going to market. Relevancy is still a major factor in your ability to efficiently serve ads. The highest bidder does not necessarily win the auction. With that in mind, it’s important you use the following guidelines to set your brand up for success in the new advanced second-price auction environment:

Focus on the fundamentals:

    1. Content → Optimize your PDP content (titles, keywords, descriptions, images, ratings & reviews. (See our 8 Content Best Practices Guide for tips and tricks) 
    2. Item Categorization – ensure your item taxonomies are set up appropriately as this affects the keywords and categories you are able to advertise against
    3. Win the buy box – Stay in stock. Make sure your items are available for purchase when customers land on your item page.

Play Smart:

    1. Know your goals and the KPIs to measure those goals
    2. Set your max bids to values you are comfortable paying
    3. Focus on search in-grid. Most conversions happen in search
    4. Bid on keywords that are most relevant to your item and drive the most sales. If search in-grid is the digital equivalent of the in-store shelf, make sure you are showing up on the right aisle, preferably on the top row.
    5. Don’t overpay for branded search terms. Keep a close eye on your auto campaign spend to make sure your ad dollars are not being funneled exclusively to branded search.

Reach Out

Harvest Group is proud to serve brands as a Walmart Platform Partner as they navigate the complex world of advertising. If you’d like to learn more about Harvest Group and our partnership with Walmart Connect, reach out to hello@harvestgroup.com.

Taylor Burkhalter

Author Taylor Burkhalter

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