Definition & Meaning of "ad auction"

What is an "ad auction"?

An ad auction is a system used by online platforms to determine which advertisements are displayed to users based on bids placed by advertisers. In this process, advertisers bid on specific keywords or placements, and the platform selects which ads to show based on factors such as bid amount, relevance, and quality. The highest bidder does not always win; instead, ad placement is determined by a combination of bid price and the ad's overall quality score. Ad auctions are commonly used in search engine advertising and social media platforms, enabling advertisers to compete for visibility in a fair and dynamic environment.