Rather than running a real auction, since they are the beneficiary of a higher ad bid, then run a bot that calculates the "best second price bid" just so accurate, that the winner pays their full bid.
The way "second price auctions" are advertised to work is that they incentivize bidders to put in their real max bid, because the winner only pays the 2nd place price + $0.01, so if the bids are $5, $4 and $3.. the winner pays $4.01 ...
Instead Amazon constructed a fake ad bidding bot & pushed up the second price by placing higher bids. And in cases that the Amazon bot won the auction, they still gave it to the high bidder at their bid price! This became noticeable when bid winners were getting charge their bid price which should be rare in second price auctions! Its win-win for the Amazon bot to bid high because they never actually pay for the ad themselves.
Comments
The mechanics of this are really bad and speak to the difference in regulations between ad exchanges & stock exchanges.
Matt Levine had a good write-up of it - https://www.bloomberg.com/opinion/newsletters/2026-09-01/ama...
Rather than running a real auction, since they are the beneficiary of a higher ad bid, then run a bot that calculates the "best second price bid" just so accurate, that the winner pays their full bid.
The way "second price auctions" are advertised to work is that they incentivize bidders to put in their real max bid, because the winner only pays the 2nd place price + $0.01, so if the bids are $5, $4 and $3.. the winner pays $4.01 ...
Instead Amazon constructed a fake ad bidding bot & pushed up the second price by placing higher bids. And in cases that the Amazon bot won the auction, they still gave it to the high bidder at their bid price! This became noticeable when bid winners were getting charge their bid price which should be rare in second price auctions! Its win-win for the Amazon bot to bid high because they never actually pay for the ad themselves.