Cogblog Discusses The Complexities Of The Second-Price Ad Auction; Microsoft’s Online Operation Burning Through Hundreds Of Millions

» Brent Halliburton does a great post on second-price auctions on Cogblog this week. Halliburton talks about some of the issues around the second-bid auctions, and how floor pricing can affect it. One of his key examples of how dynamic floor pricing can affect bidders is when a second bid is lower than the publisher's asking price and the highest bid is significantly greater. In that particular scenario, the impression is returned to the publisher because the second bid was lower than the publisher's asking price. He describes dynamic floor pricing as a "moving target" with both buyer and seller looking for price equilibrium. But the ad tech industry continues to work tirelessly at addressing these "growing pains". Remember RTB is still a nascent buying methodology, and there's bound to be some initial problems. It's an interesting read, and follows on nicely from some recent analysis by Eric Picard. In a piece that focuses on DSPs, Picard touches on some issues relating to RTB, including asymmetric bidding and low bid density. He uses some nice and simple examples to illustrate his points on the second-bid auction. Picard's perspective is useful for those looking to get up to speed on second-place auctions and bidding methodologies.

» Microsoft's quarter earnings might have beat the Street's guidance, but it continues to burn through stacks of cash in its online operation. The Microsoft earnings reveal that it's losing $696 million in its online division. The chart below (courtesy of BussinessInsider) shows that the division hasn't turned a profit since the final quarter of 2005. Microsoft clearly have very deep pockets.