Ad Exchange auction model

The ad auction is used to select the ads that will appear on your pages and determine how much you’ll earn from those ads. All ads pay different amounts of money, depending on factors such as how much an advertiser has bid for the ad. The ads that win in the auction are the ones you see on your pages.

The ad auction is designed to ensure that you’re earning the most possible revenue for your ad space. The more advertisers that bid to appear on your pages, the higher the competition is for your ad units, and the more you can earn.

DoubleClick Ad Exchange uses a second price auction model:

• In the open auction, Ad Exchange matches buyers' targeting with sellers' inventory and seeks the highest bid.
• The buyer with the highest net bid wins.
• If two or more buyers bid the same amount for an impression, the winner is selected randomly.
• The Ad Exchange auction closing price is determined as the second-highest bid price in the Ad Exchange auction or the ad unit's minimum CPM, whichever is greater. Sellers are paid the Ad Exchange closing price, net of Google's Ad Exchange revenue share.
• If Preferred Deals or Private Auctions are in play for an ad unit, they are taken into consideration before the impression goes to the open auction.

Source: Google Support