On the ranking strategy in adword auctions

International audienceSearch engines get revenue thanks to adword auc- tions, where commercial links are proposed and charged to advertisers as soon as the link is clicked through. Most search engines have chosen (or switched to) a revenue-based ranking and charging scheme instead of a bid-based one. We investigate here the relevance of that scheme when advertisers valuation comes from a random distribution. We show that, depending on the search engines click-through-rate, revenue-based does not always outperform bid-based in terms of revenue to the search engine. As a result, some search engines may have an interest to move to revenue-based ranking while others do not

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