Definition:

A process where advertisers bid on ad placements, and the highest bidder gets the ad space.

Example:

Suppose there’s a website that offers ad space on its homepage, and multiple advertisers are interested in placing their ads on this website. The website owner decides to hold an ad auction to determine which ad(s) will be displayed on the homepage.

The auction works as follows: the advertisers submit bids indicating how much they are willing to pay for each click or impression of their ad. For example, advertiser A might bid $0.50 per click, while advertiser B might bid $0.75 per click.

Once all the bids are in, the website owner reviews them and selects the highest bidder(s) to display their ad(s) on the homepage. In this example, if advertiser B’s bid of $0.75 per click is the highest, then their ad will be displayed on the homepage. If there are multiple ad slots available, the next highest bidder(s) may also be selected to fill those slots.

The selected ad(s) will be displayed on the website for a set period of time, or until the advertiser’s budget for the ad campaign is exhausted. The website owner will collect payment from the winning advertiser(s) based on the agreed-upon terms of the auction (e.g., cost per click or impression).