Walmart Keyword Bidding: Second Price Auction
Meghna Bhalla, Tiffany Luk, June 1, 2022
To remain competitive within the growing eCommerce space, Walmart.com has recently announced several changes to their search relevancy and product ranking algorithms. This includes the single most impactful change that many Walmart advertisers have been waiting for, and it has finally arrived! Walmart has just announced that it will be transitioning to a second price auction in the coming days!
First Price vs. Second Price Auction
Historically, Walmart has operated as a first-price auction, also known as a blind auction. Advertisers submit a bid based on the highest amount that they are willing to pay for a keyword - with no knowledge about competitors’ bids. Once an advertiser wins the auction, they must pay exactly the bid amount that they had submitted.
This can essentially create two scenarios. For one, an advertiser who bids too high and ends up significantly overpaying for a keyword in relation to the bid of their closest competitor. In the second case, the advertiser significantly underbids and this results in losing the auction on their most strategic keywords due to the fear of overpaying.
Now, with Walmart’s second price auction, the highest relevant bidder only has to pay a small amount higher than the bid of their closest competitor.
Walmart’s Unique Second Price Auction
However, it is important to note that Walmart’s advanced second-price auction is designed to prioritize ad relevancy. The winning item is based on the highest relevance and then the cost-per-click price is determined based on any relevant competing bids. Despite the maximum bid in the auction, the winner will only need to pay the amount necessary to beat any relevant competing bids. That being said, this amount may not necessarily be the winner’s maximum bid and may even be lower than competing bids for less relevant items.
Here is an example in which there are only three bidders in the auction:
Relevancy Score: 98%
Relevancy Score 60%
Relevancy Score: 80%
Despite having the highest bid, Advertiser B isn’t as relevant to the search term as A or C. Given that Advertiser A has the next highest bid and is also the most relevant, Advertiser A is the auction winner. Advertiser A will end up paying somewhere between $3 and $4.50, this amount will be determined by Walmart’s algorithms.
How Can I Succeed on Walmart’s New Second Price Auction?
Enhance your Content
Given the fact that Walmart has continued to place such a large importance on product relevancy, especially when deciding winning bidders - advertisers must ensure that their content is up to date with the Walmart Style Guides. Having a well curated Product Detail Page (PDP) and content will in turn result in a product’s relevancy score and organic rank to be higher, allowing advertisers to pay less for their strategic keywords.
2. Don’t Underbid
Given the new auction dynamic, advertisers no longer need to fear overspending and can be more aggressive with their bidding strategies knowing they will likely be paying a lower CPC. Perpetua users will not need to worry about setting manual bid overrides, as our ad engine will automatically adjust our always-on optimization towards a second price auction and adjust the bids for your keywords accordingly.
3. Assign Bids According to the Current Organic Rank of Your Items
As mentioned previously, the advertiser of an item with a high relevancy score is able to bid lower than their competitors in order to win the auction. Given that relevancy and organic rank are so tightly connected on Walmart.com, advertisers can safely assume an item with a high organic rank likely has a higher relevancy to that keyword. If you have multiple items that are competing for the same keyword, ensure that you are assigning different bids based on the organic rank of that item. For example, your item with an organic rank of 100 will need a higher bid to reach spot 1 than your item that has an organic rank of 10 to reach the same spot.
We are confident that Walmart’s transition to a second-price auction will be extremely beneficial to advertisers as it will reduce the risk of overpaying and could potentially increase a brand's overall return on investment on Walmart.com. However, it is important to adjust your strategy based on this change as well as your specific marketing objectives to ensure that you are fully leveraging the benefits of this new auction dynamic.
To learn more how you can succeed on Walmart’s new second-price auction and how Perpetua’s always-on optimization can aid to automate your strategy, reach out to us at email@example.com.
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