Items from Internet Monetization track

Motivated by the emergence of auction-based marketplaces for display ads such as the Right Media Exchange, we study the design of a bidding agent that implements a display advertising campaign by bidding in such a marketplace. The bidding agent must acquire a given number of impressions with a given target spend, when the highest external bid in the marketplace is drawn from an unknown distribution P . The quantity and spend constraints arise from the fact that display ads are usually sold on a CPM basis. We consider both the full information setting, where the winning price in each auction is announced publicly, and the partially observable setting where only the winner obtains information about the distribution; these differ in the penalty incurred by the agent while attempting to learn the distribution. We provide algorithms for both settings, and prove performance guarantees using bounds on uniform closeness from statistics, and techniques from online learning. We experimentally evaluate these algorithms: both algorithms perform very well with respect to both target quantity and spend; further, our algorithm for the partially observable case performs nearly as well as that for the fully observable setting despite the higher penalty incurred during learning.

Ad auctions in sponsored search support “broad match” that allows an advertiser to target a large number of queries while bidding only on a limited number. While giving more expressiveness to advertisers, this feature makes it challenging to optimize bids to maximize their returns: choosing to bid on a query as a broad match because it provides high profit results in one bidding for related queries which may yield low or even negative profits. We abstract and study the complexity of the bid optimization problem which is to determine an advertiser’s bids on a subset of keywords (possibly using broad match) so that her profit is maximized. In the query language model when the advertiser is allowed to bid on all queries as broad match, we present a linear programming (LP)-based polynomialtime algorithm that gets the optimal profit. In the model in which an advertiser can only bid on keywords, ie., a subset of keywords as an exact or broad match, we show that this problem is not approximable within any reasonable approximation factor unless P=NP. To deal with this hardness result, we present a constant-factor approximation when the optimal profit significantly exceeds the cost. This algorithm is based on rounding a natural LP formulation of the problem. Finally, we study a budgeted variant of the problem, and show that in the query language model, one can find two budget constrained ad campaigns in polynomial time that implement the optimal bidding strategy. Our results are the first to address bid optimization under the broad match feature which is common in ad auctions.

In sponsored search, a number of advertising slots is available on a search results page, and have to be allocated among a set of advertisers competing to display an ad on the page. This gives rise to a bipartite matching market that is typically cleared by the way of an automated auction. Several auction mechanisms have been proposed, with variants of the Generalized Second Price (GSP) being widely used in practice. There is a rich body of work on bipartite matching markets that builds upon the stable marriage model of Gale and Shapley and the assignment model of Shapley and Shubik. This line of research offers deep insights into the structure of stable outcomes in such markets and their incentive properties. In this paper, we model advertising auctions in terms of an assignment model with linear utilities, extended with bidder and item specific maximum and minimum prices. Auction mechanisms like the commonly used GSP or the well-known Vickrey-Clarke-Groves (VCG) can be interpreted as simply computing a bidder-optimal stable matching in this model, for a suitably defined set of bidder preferences, but our model includes much richer bidders and preferences. We prove that in our model the existence of a stable matching is guaranteed, and under a non-degeneracy assumption a bidder-optimal stable matching exists as well. We give an algorithm to find such matching in polynomial time, and use it to design truthful mechanism that generalizes GSP, is truthful for profitmaximizing bidders, correctly implements features like bidder-specific minimum prices and position-specific bids, and works for rich mixtures of bidders and preferences. Our main technical contributions are the existence of bidder-optimal matchings and strategyproofness of the resulting mechanism, and are proved by induction on the progress of the matching algorithm.

Behavioral Targeting (BT) is a technique used by online advertisers to increase the effectiveness of their campaigns, and is playing an increasingly important role in the online advertising market. However, it is underexplored in academia how much BT can truly help online advertising in search engines. In this paper we provide an empirical study on the click-through log of advertisements collected from a commercial search engine. From the experiment results over a period of seven days, we draw three important conclusions: (1) Users who clicked the same ad will truly have similar behaviors on the Web; (2) Click-Through Rate (CTR) of an ad can be averagely improved as high as 670% by properly segmenting users for behavioral targeted advertising in a sponsored search; (3) Using short term user behaviors to represent users is more effective than using long term user behaviors for BT. We conducted statistical t-test which verified that all conclusions drawn in the paper are statistically significant. To the best of our knowledge, this work is the first empirical study for BT on the click-through log of real world ads.

Search auctions have become a dominant source of revenue generation on the Internet. Such auctions have typically used per-click bidding and pricing. We propose the use of hybrid auctions where an advertiser can make a per-impression as well as a per-click bid, and the auctioneer then chooses one of the two as the pricing mechanism. We assume that the advertiser and the auctioneer both have separate beliefs (called priors) on the click-probability of an advertisement. We first prove that the hybrid auction is truthful, assuming that the advertisers are risk-neutral. We then show that this auction is superior to the existing per-click auction in multiple ways: 1. We show that risk-seeking advertisers will choose only a per-impression bid whereas risk-averse advertisers will choose only a per-click bid, and argue that both kind of advertisers arise naturally. Hence, the ability to bid in a hybrid fashion is important to account for the risk characteristics of the advertisers. 2. For obscure keywords, the auctioneer is unlikely to have a very sharp prior on the click-probabilities. In such situations, we show that having the extra information from the advertisers in the form of a perimpression bid can result in significantly higher revenue. 3. An advertiser who believes that its click-probability is much higher than the auctioneer’s estimate can use per-impression bids to correct the auctioneer’s prior without incurring any extra cost. 4. The hybrid auction can allow the advertiser and auctioneer to implement complex dynamic programming strategies to deal with the uncertainty in the clickprobability using the same basic auction. The per-click and per-impression bidding schemes can only be used to implement two extreme cases of these strategies. ∗Research supported in part by NSF ITR grant 0428868, by gifts from Google, Microsoft, and Cisco, and by the Stanford-KAUST alliance. †Research supported by NSF via a CAREER award and grant CNS-0540347.

Web service development and usage has shifted from simple information processing services to high-value business services that are crucial to productivity and success. In order to deal with an increasing risk of unavailability or failure of mission-critical Web services we argue the need for advanced reservation of services in the form of derivatives. The contribution of this paper is twofold: First we provide an abstract model of a market design that enables the trade of derivatives for mission-critical Web services. Our model satisfies requirements that result from service characteristics such as intangibility and the impossibility to inventor services in order to meet fluctuating demand. It comprehends principles from models of incomplete markets such as the absence of a tradeable underlying and consistent arbitragefree derivative pricing. Furthermore we provide an architecture for a Web service market that implements our model and describes the strategy space and interaction of market participants in the trading process of service derivatives. We compare the underlying pricing processes to existing derivative models in energy exchanges, discuss eventual shortcomings, and propose Wavelets as a preprocessing tool to analyze actual data and extract long- and short-term seasonalities.