Characterizing Optimal Adword Auctions

We present a number of models for the adword auctions used for pricing advertising slots on search engines such as Google, Yahoo! etc. We begin with a general problem formulation which allows the privately known valuation per click to be a function of both the identity of the advertiser and the slot. We present a compact characterization of the set of all deterministic incentive compatible direct mechanisms for this model. This new characterization allows us to conclude that there are incentive compatible mechanisms for this auction with a multi-dimensional type-space that are {\em not} affine maximizers. Next, we discuss two interesting special cases: slot independent valuation and slot independent valuation up to a privately known slot and zero thereafter. For both of these special cases, we characterize revenue maximizing and efficiency maximizing mechanisms and show that these mechanisms can be computed with a worst case computational complexity $O(n^2m^2)$ and $O(n^2m^3)$ respectively, where $n$ is number of bidders and $m$ is number of slots. Next, we characterize optimal rank based allocation rules and propose a new mechanism that we call the customized rank based allocation. We report the results of a numerical study that compare the revenue and efficiency of the proposed mechanisms. The numerical results suggest that customized rank-based allocation rule is significantly superior to the rank-based allocation rules.Comment: 29 pages, work was presented at a) Second Workshop on Sponsored Search Auctions, Ann Arbor, MI b) INFORMS Annual Meeting, Pittsburgh c) Decision Sciences Seminar, Fuqua School of Business, Duke Universit

The Preliminary Ruling Decision in the Case of Google vs. Louis Vuitton Concerning the AdWord Service and its Impact on the Community Law

The internet user after entering the keywords obtains two kinds of search results – natural and sponsored ones. The following paper deals with the issue of using keywords which correspond to trademarks registered by a third party for advertising purposes through internet search portals such as Google, Yahoo, Bing, Seznam, Centrum etc. (in principle web search portals). The objective of this article is to analyze decided cases dealing with the AdWords service issued by the Court of Justice of the European Union and compare them also with the attitude in similar disputes in the U.S. Within this knowledge it is necessary to determine the impact of these decisions on further national courts decisions of European Union member states. Moreover there is also legal impact on copyright law and responsibility of internet search engines deduced. The method of the analysis of courts decisions is used and the method of legal comparison is applied to different attitudes in similar cases. Where a third party uses a sign which is identical with the trademark in relation to goods or services identical with those for which the mark is registered, the trademark proprietor is allowed to prohibit such use if it is liable to affect one of the functions of the mark (particularly the function of indicating origin). Regarding to the liability of the Internet search engine itself, decisions of the courts in matters of Internet search engines in the European Union vary from state to state. Whereas the German courts tend to currently access the responsibility for the outcome of the search engines more freely, the French courts are often more stringent. Differently, we can say much more liberal, is the access of the U.S. courts to this issue. Preliminary ruling decision in case of Louis Vuitton Malletier SA vs. Google, Inc. and community practice in further cases follow similar (liberal) decisions of the courts of the U.S

Dynamic Online-Advertising Auctions as Stochastic Scheduling

We study dynamic models of online-advertising auctions in the Internet: advertisers compete for space on a web page over multiple time periods, and the web page displays ads in differentiated slots based on their bids and other considerations. The complex interactions between the advertisers and the website (which owns the web page) is modeled as a dynamic game. Our goal is to derive ad-slot placement and pricing strategies which maximize the expected revenue of the website. We show that the problem can be transformed into a scheduling problem familiar to queueing theorists. When only one advertising slot is available on a webpage, we derive the optimal revenue-maximizing solution by making connections to the familiar cμ rule used in queueing theory. More generally, we show that a cμ-like rule can serve as a good suboptimal solution, while the optimal solution itself may be computed using dynamic programming techniques

On the Benefits of Keyword Spreading in Sponsored Search Auctions: An Experimental Analysis

Sellers of goods or services wishing to participate in sponsored search auctions must define a pool of keywords that are matched on-line to the queries submitted by the users to a search engine. Sellers must also define the value of their bid to the search engine for showing their advertisements in case of a query-keyword match. In order to optimize its revenue a seller might decide to substitute a keyword with a high cost, thus likely to be the object of intense competition, with sets of related keywords that collectively have lower cost while capturing an equivalent volume of user clicks. This technique is called keyword spreading and has recently attracted the attention of several researchers in the area of sponsored search auctions. In this paper we describe an experimental benchmark that through large scale realistic simulations allows us to pin-point the potential benefits/drawbacks of keyword spreading for the players using this technique, for those not using it, and for the search engine itself. Experimental results reveal that keyword spreading is generally convenient (or non-damaging) to all parties involved

Adword auction bidding strategies of budget-limited advertisers on competing search engines

International audienceThe economic stakes of advertising on the Internet -and in particular, of auctions for keywords in search engines- are enormous and still increasing. We focus in this paper on situations where bidders (advertisers) on sponsored search auction systems have a limited budget, so that they may not be able to afford to participate in all auctions. Using a game-theoretical model of the strategic interactions among advertisers, we analyze the equilibrium strategies in terms of bidding frequencies, in the case of one monopoly search engine and when two search engines are in competition. Our results exhibit the importance for search engines to develop their attractiveness to customers, due to the impact this has on auction revenues