Walmart is making big changes to stay competitive with fellow e-commerce retail giants. One of its biggest announcements this past spring was the move to second-price auctions for PPC product ads. But under this model, the top bidder doesn’t always pay the top price.
So what does this mean for your ad strategy and how can you stay competitive.
The bottom line is that things are about to get even better for Walmart Connect advertisers.
What Are Second-Price Auctions?
A second-price auction is an ad bidding model where the top bidder pays $0.01 more than the second-highest bidder. Here’s an example:
Bidder 1: $7
Bidder 2: $6
Bidder 3: $5
Winning bidder: Bidder 1
Final price: $6.01
In this example, bidder 1 wins because they bid the highest. But instead of paying a set ad amount, the advertiser pays $0.01 more than the next highest bidder.
Walmart Connect’s algorithm accounts for one other factor beyond price — ad relevance. The media giant calls this model “advanced second-price auction.” The platform first determines which competing ads are most relevant to the consumer’s search. It then awards placement to the most relevant ad based on:
- The customer’s intent
- The ad’s contextual relevance
- The quality of item page content
- The product’s historical performance at Walmart
Under this advanced model, ad relevance carries more weight:
Bidder 1: $7, 98% relevance
Bidder 2: $7.50, 60% relevance
Bidder 3: $5.50, 80% relevance
Winning bidder: Bidder 1
Final price: Somewhere between $5.50 and $7, depending on Walmart’s algorithm
The craziest part? It all happens in real time within a matter of milliseconds.
It’s important to note that the winner never pays higher than their bid, ensuring they’re always in control of their budget.
How Does This Affect Advertisers?
Walmart says the new auction model “helps give advertisers the confidence to bid their best, with a reduced risk of overpaying.”
Under this model, that means a lower cost-per-click (CPC) and a potentially higher return on advertising spend (ROAS).
Plus, the money you save between your bid and the final price can be applied to more ads. You’ll also discover more about your competitors’ bidding strategies, giving you an idea of how to win future auctions.
What Strategies Win Second-Price Auctions?
Believe it or not, winning at second-price auctions is easier and more attainable than first-price auctions — but it does involve some risk in placing the highest bid. To thrive under Walmart’s new model, you must:
- Stay relevant. First and foremost, bid on terms that are relevant to your product. If you sell coffee mugs, bidding the highest on sock ads won’t guarantee you a win.
- Focus on fundamentals. Keep product content accurate and up to date, matching taxonomy to the keywords you bid on. Ensure in-stock status to maintain customer satisfaction.
- Set goals ahead of time. Know your limits. Set attainable goals and corresponding max bids to ensure you achieve important KPIs.
- Try bid multipliers. Multipliers let you designate a percentage amount you’re willing to increase your bid, upping your chances of securing top placements.
- Tailor bids. Bid lower on broad matches for widest audience reach and higher on exact matches for customers searching with intent.
- Increase the budget. Consider increasing your daily budget cap during peak selling times to capture more sales when it matters most.
How Can ChannelAdvisor Help?
PPC bidding, product pricing and advertising can be complex to manage in tandem. ChannelAdvisor Managed Services is well-versed in Walmart-specific selling and advertising to help you meet your goals. We function as an extension of your team, combining our technology with marketplace expertise so you can focus on business strategy instead of manual changes. In addition to optimizing your bids, we also help you identify new audiences, track conversions and more.
Contact our team today for a demo of the ChannelAdvisor platform and a look at how Managed Services can supercharge your Walmart advertising strategy.
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