What is RGSP? Your Guide to Google’s Revamped Ad Auction Model
Google AdWords switched to a Randomized Generalized Second Price (RGSP) auction system in 2019. This replaced the previous Generalized Second Price (GSP) auction model that had been in place since 2002. The RGSP model brings Google’s ad auction system more in line with how other online ad platforms like Facebook operate.
The change to RGSP aims to make ad prices more competitive and fairer for advertisers. In this article, we’ll explain what RGSP is, how it works, and the impacts it has on Google Ads campaigns.
What is Second Price Auction?
In a second price auction, the winner pays the amount bid by the second highest bidder, not their own maximum bid. This encourages bidders to bid the true value they believe the item is worth.
For example, if Bidder A bids $10 and Bidder B bids $5 for an item, Bidder A would win but only pay $5. The rationale is that bidders should bid the maximum they are willing to pay and not have to worry about overpaying if they win.
Google AdWords previously used a Generalized Second Price auction, meaning the winner paid one penny more than the second highest bidder.
What is Randomized Generalized Second Price (RGSP)?
With RGSP, Google now randomizes or shuffles the ad rankings for any ads with the same maximum Cost-Per-Click (CPC) bid. The winner still pays one penny more than the next highest bidder, but the order ads appear is randomized if their bids are the same.
For example, if Advertiser A and Advertiser B both bid a max CPC of $1 for the keyword “shoes”, their ad positions may swap randomly each time the auction runs rather than the traditional model of ranking solely by bid amount and Quality Score.
Why did Google switch to RGSP?
There were several reasons Google moved to an RGSP model:
- Reduce bid gaps between advertisers
- Make it harder to reverse engineer competitor bids
- Increase competition and make auctions more fair
- Bring ad auction model closer in line to Facebook, which also randomizes same-bid auctions
Under the previous GSP setup, advertisers could often easily spot the bid difference between their position and the next highest bidder. They could then lower bids slightly while maintaining rank. This meant Google missed out on potential revenue.
How does RGSP bidding work?
With RGSP, Google now only shows a range indicating the approximate positioning of an advertiser’s bid relative to competitors. Bids are randomized within that range when appearing for the same keyword.
For example, a bid might be shown as “Above first page bid (High)” or “Below first page bid (Low)”. Google no longer reveals the precise bid differences.
Advertisers now have to increase bids more significantly to firmly cement a higher ad position. Small bid changes may lead to random jumps up and down in rank.
Impacts on Quality Score
Quality Score remains a key factor that influences ad rank under RGSP, along with bid amount. However, because multiple advertisers can have the same Quality Score, the randomizing aspect aims to evenly distribute traffic among same-Quality Score ads.
Maintaining a high Quality Score through relevant ads and landing pages remains important. But focusing solely on Quality Score to beat competitors is less effective under RGSP.
How RGSP impacts Campaign Management
The move to RGSP auction model requires advertisers to adjust strategies when managing Google Ads campaigns, including:
- Bidding higher to maintain positions, since small changes may cause volatility
- Focusing less solely on Quality Score, and more on bid amounts
- Monitoring and optimizing for new ranking ranges rather than Ad Positions
- Adding more closely related keywords to capture traffic from randomization
- Adjusting bids regularly to account for randomization effects
Overall, RGSP makes ad ranks more fluid and harder to predict via narrow bid strategies. Advertisers need to take a broader optimization approach across keywords and ads.
Benefits of RGSP for Google
The swap to an RGSP auction model provides some key benefits for Google:
- Increases competition among advertisers and should raise ad prices
- Makes ad pricing more competitive like other platforms
- Reduces cases of advertisers gaming the system through bid gaps
- Means advertisers have to bid their true max value to lock in ranks
- Potentially raises overall ad revenue for Google
While advertisers need to adjust strategies under RGSP, Google argues the model is fairer and makes the auction system more efficient.
Benefits of RGSP for Advertisers
While challenging at first, over time RGSP offers some advantages to advertisers including:
- Encourages broader keyword coverage to capture randomized traffic
- Rewards flexible optimization efforts vs bid targeting
- Reduces cases of rivals unfairly hiking bids to take top spots
- Makes maintaining rank positioning more achievable for smaller brands
- Levels the playing field somewhat between advertisers
RGSP incentives adjusting tactics but creates a more balanced auction environment.
Implementation of RGSP Rollout
Google implemented RGSP in a gradual, phased approach:
- Early 2019 – RGSP piloted on YouTube auctions
- Mid 2019 – Expanded RGSP to Display campaigns
- Late 2019 – RGSP enabled for all Search campaigns globally
- 2020 onwards – Continued optimization of RGSP system
The gradual rollout allowed Google to refine the system and gave advertisers time to test and adapt strategies.
Ongoing Evolution of RGSP
While launched fully in 2019, Google notes that RGSP will continue to evolve over time rather than being a fixed setup. Some areas of ongoing development include:
- Weighting of creative quality along with bids
- Applying machine learning to improve ranking logic
- Potentially revealing more auction insights to advertisers
- Integration with Google’s Discovery campaigns
- Developing controls for brand safety and ad frequency
So while the core principles of RGSP are established, Google is still looking at enhancements to the model.
Summary
The Randomized Generalized Second Price auction model brings Google’s ad auction process more in line with platforms like Facebook. Advertisers now need to focus more holistically on bids, keywords, and quality to maintain ranks rather than gaming bid gaps. While requiring updated strategies, RGSP aims to make the ad auction system fairer and more competitive.
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