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Comment by andrewyates2020 | Hacker News Reader

andrewyates2020

We already see some of this. I like the admission that there is no magic happening with GSP but I don't think FPA will work for most cases:

1) GSP doesn't promise any specific price. FPA promises "the price you bid." If that's not what people are paying by simple math, it will be confusing. That hurts trust. This could happen if you have a user quality control system that penalizes poor quality. GSP gives you a second control (price) in combination with delivery volume and placement to manage user experience.

2) People expect GSP. Claiming FPA is an admission that you need to build an autobidder system versus letting people discover this for themselves.

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FPA is the devil, I'm pretty sure that the only reason Google implemented it is that they needed to juice their revenue numbers.

Like, the trouble with FPA is that it extracts "too much" money from the bidder, as they pay their marginal cost. GSP (second price more generally) does have the nice property that you'll always pay less than your maximum bid, which is the margin (assuming you're bidding your maximum profitable LTV).

Also, congratulations Andrew, I'm sure you guys are gonna do incredibly well (and if you have problems in this space, I strongly recommend giving promoted.ai a look).

Gsp does NOT have this dominant strategy property! People think it does which ironically makes it much better at “extracting value.” non repeated second price auction has this property. Gsp will almost always overprice just like fpa except in very unrealistic situations

So, in a FPA I bid $1. I win, and pay $1.

In a GSP, I bid $1. I'll pay the second price (not really but for purposes of clarity assume it) which was $0.90.

In this case, I always (almost) pay less than my maximum bid, which allows for margin given to me (assuming true value and a bunch of other unrealistic things) rather than in the FPA, where I pay $1, assuming my bid is highest.

I'm not talking in incentive-compatibility terms, rather in terms of where the "margin" goes.

In FPA, you need to strategically lower your bid to get "margin." In GSP, that's also true. I have some details here:

https://medium.com/promoted/when-goog-fb-is-bad-for-your-per...

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