Auction theory – reverse auction example

As part of building next generation of adtech marketplaces i try and find & use as many different marketplaces as possible in other industries to see what lessons can be learned from the mechanics, and how it’s users behave. This time it’s home moving platform Anyvan!

 

AnyVan is a reverse auction platform allowing people who want things moved (buyers) to get the cheapest bids from people who can move them (seller/bidders).

 

I used it in my move to London placing a job which became a reverse auction, and had a good talk with the guy who won about how it works on the bidders side too.

 

In a reverse auction the roles of buyer and seller are reversed, and the clear price goes down with every bid. All bidders need to see the last bid price to know what they need to bid lower than.

 

FAVOR REVERSE AUCTION FAVOR STANDARD AUCTION
Many potential Publishers Few potential Publishers
Commodity or standardized product Specialized or custom product
Transactional prevalent relationships Long-term, strategic relationship is important
Excess Inventory Little or no excess Inventory
Price is the key selection criterion Other issues are as or more important than price

[ Perfect for Display not for Video? ]

The most common problem is each party being happy with the outcome. If the bidder makes a wrong assumption because there was not enough information from the buyer then she will be unhappy, if the buyer thinks the bidder knows what he’s buying but doesn’t honour the bid then they will be unhappy.

AnyVan solves this problem by forcing an exact job spec from the job poster (buyer), full transparency of every bids, each bidder, and with a slight risk to user privacy exposes all messages between a buyer and bidder to all the other bidders. This saves customer service acting as intermediary and creates a self informing auction. Bidders are scored by buyers to provide a self policing ecosystem.

adens-anyvanjob-dec-2015
[how my job went down]

The only thing it hides is the commission it charges. To users it’s fairly obvious because it’s the ‘deposit’ you make when accepting the winning bid. For bidders it’s not, they submit and see others bids without the commission applied. For me the winning bid total was £163, the deposit £40 , with the winner confirming he bid £123. So Anyvan’s commission was £40.

It’s a great example of how open transparency makes a vibrant marketplace with happy buyers, sellers and minimal overheads. With some polishing of the platform it could easily scale into other verticals or even to a Priceline model for travel & rentals.

How can this be applied to Adtech?

Reverse bidding is unlikely to happen anytime soon even for Display where there is a glut of inventory. Premium Publishers won’t get involved for fear of Advertisers using a lower bid price from a remnant Publisher to negotiate lower rates.

If however a DSP were to offer it’s own auction and invite Publishers to bid for their Ad spend then they would be swamped, albeit with remnant Ad networks.

[graphic here to demonstrate?]

Conclusion

The real lesson here is the importance of transparency which has always been missing in Adtech, limited by technology, publisher capabilities, fraud, and lack of incentives for the supply side to provide it.

The buy-side with its take it or leave it approach gives minimal information too, and big buyers like trading desks & large advertisers are only scored amongst publishers by rumours & backroom conversations amongst themselves.

Anyvan shows the kind of trust and vibrancy that can be created with a transparent marketplace. I for one am baking it into every product we build.

Aden Forshaw

Aden Forshaw is Creative Director and Chief Technical Officer over at Coull.com

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