Did you know that pay-per-click (PPC) ads generate 50% more conversions than any other e-commerce advertising?
One of the popular giants in e-commerce and retail, Walmart is constantly innovating to stay in line with competitors. It has just announced that it will move to a second price auction for its product listing ads. The new system will allow advertisers to save money while increasing competitiveness.
How Does a Second-Price Auction Work?
The second-price auction brings in a brand new bidding process to how Walmart manages PPC. Instead of advertisers bidding their maximum amount as they do currently in the first-price auction, they now have the option to seemingly place a bid without making an actual bid. This is done by marking a bid at one penny higher than the next highest ad.
For example, using a first-price auction, if the current highest bid is $0.55 and you bid $1.00, you pay $1.00 per click regardless that the highest bid was lower. In a second-price auction, if the current highest bid is $0.55 and you bid $1.00, you would pay $0.56 per click.
The new system is an online auction, where advertisers will be bidding against each other. The second-highest bid will determine the winner.
How Does This Affect Me?
As an e-commerce seller, you are likely wondering how this changes things for you and your business. Well, you’ve come to the right place!
As a seller, you need to try to understand how these new changes might impact you. While it may seem like a disadvantage, the second-price auction is actually a step in the right direction for e-commerce sellers trying to be successful on Walmart.com.
With this new system, sellers will be able to save money and still compete against their competitors as it will allow you to save money while still placing the highest bid.
It means that you will get more competition, which will somewhat increase your visibility in the search results. With some competition, you will end up paying less.
With a second-price auction, your competitors will be forced to bid higher and higher prices, which should give you an upper hand, as your bidding prices will be lower. Therefore, the second-price auction allows you to win with fewer funds, which will be handy when bidding on more competitive keywords.
How to Win Second-Price Auctions
So, if the highest bidder does not win the auctions, how do you win them?
You are only eligible to win the auction in a second-price auction if you place your bid at a penny higher than the second-highest bidder. This rule should be followed to understand how to win the auction.
You cannot simply place a bid on your competitor and win the auction. This will not work. Instead, you have to place a bid at a penny higher than the next highest bid.
The second price auction might be a little confusing at first, but you can turn it to your advantage if you understand the rules.
For instance, if you are competing with an ad that has a bid of $0.10 and you want to stay a step above your competitor, you can place your bid at $0.11, which will automatically be the highest bid.
How to Bid in Second-Price Auctions
The second price auction allows you to win with fewer funds, which will be handy when bidding on more competitive keywords.
You should know how to bid in this auction. You can only bid on the competitor’s bid by a penny extra.
For instance, if your competition is bidding $0.10, then you have to bid $0.11 to win the auction. This should be kept in mind because, otherwise, you would end up bidding the same amount as your competitor, which is the lowest bid. If you bid the lowest bid, then you will not win the auction.
Bid Above The Competition
However, oftentimes with second price bidding, you cannot see the competition’s bids. So what do you do in this case?
Simple! Bid far above the competition.
Because you do not pay the price as you bid, you can bid a bit more aggressively if you do not go over the price you are willing to pay.
Let’s look at an example.
Let’s assume you are planning to bid $0.10 for an ad, and your competitor is also bidding $0.05. If you bid for $0.10, you will pay $0.06 instead of the $0.10 you originally bid. Even if your competitor places a bid between $0.05 and $0.10, you will still win the auction and pay one cent more than what the competitor bid.
Of course, if your competitor takes on the same strategy, you will both drive up the price by outbidding each other.
How is it Better Than a First-Price Auction?
You will not be charged the bid price you originally placed in a second-price auction. Rather, you will be charged one penny more.
Walmart PPC used the first-price auction, which meant that your ad would only be placed if you bid the highest price.
You’d be charged the same price whether you were number one or number two in the auction. This means that you would pay the same price whether your ad showed up at the top or the bottom of the search results.
Following the majority of the industry, Walmart has decided to start using a second-price auction. This is a welcome change as other platforms like Google Ads, Microsoft Ads, and Amazon Ads all use a second-price auction.
Get Started with Walmart PPC
There are hundreds of factors that go into advertising online. Making the right choices and implementing them requires careful planning and consideration. In the case of Walmart’s PPC, the method is effective but can be costly if not properly managed. Like any pay-per-click campaign, the advertiser needs to understand the impact and measure the performance to make sure they are maintaining goals.
Our paid search experts understand the advantages of the second-price auctions and how best to drive sales using Walmart’s PPC. If your advertising campaigns aren’t performing well, then it’s time to contact us for an account review. Our marketplace marketing experts understand how to get the most out of Walmart advertising.
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