Sponsored Search

The phenomenon of sponsored search advertising - where advertisers pay a fee to Internet search engines to be displayed alongside organic (non-sponsored) web search results - is gaining ground as the largest source of revenues for search engines. Using a unique 6 month panel dataset of several hundred keywords collected from a large nationwide retailer that advertises on Google, we

We present a deterministic exploration mechanism for sponsored search auctions, which enables the auctioneer to learn the relevance scores of advertisers, and allows advertisers to estimate the true value of clicks generated at the auction site. This exploratory mechanism deviates only minimally from the mechanism being currently used by Google and Yahoo! in the sense that it retains the same pricing rule, similar ranking scheme, as well as, similar mathematical structure of payoffs. In particular, the estimations of the relevance scores and true-values are achieved by providing a chance to lower ranked advertisers to obtain better slots. This allows the search engine to potentially test a new pool of advertisers, and correspondingly, enables new advertisers to estimate the value of clicks/leads generated via the auction. Both these quantities are unknown a priori, and their knowledge is necessary for the auction to operate efficiently. We show that such an exploration policy can be incorporated without any significant loss in revenue for the auctioneer. We compare the revenue of the new mechanism to that of the standard mechanism at their corresponding symmetric Nash equilibria and compute the cost of uncertainty, which is defined as the relative loss in expected revenue per impression. We also bound the loss in efficiency, as well as, in user experience due to exploration, under the same solution concept (i.e. SNE). Thus the proposed exploration mechanism learns the relevance scores while incorporating the incentive constraints from the advertisers who are selfish and are trying to maximize their own profits, and therefore, the exploration is essentially achieved via mechanism design. We also discuss variations of the new mechanism such as truthful implementations.

Nowadays, the Internet has had a rapid expansion and presence in all areas of the individuals, institutions, companies and organizations lives. This has made large extent of data available so that the users need to access their desired information or services through using search engines. To continue and promote providing services, search engines require a source of income. Sponsored search advertising is the main source of revenue for search engines. In sponsored search, limited areas of the search results page are dedicated to display advertising so that the advertiser pays the advertisement cost only per click. To assign advertising areas, an auction is run among advertisers. Several models have been proposed to hold a sponsored search auction. In this study, a new model is proposed to increase the revenue of the search engine. Evaluated using synthetic data, the results of the ad-supported implementation of the search engine model indicate improved revenue in comparison to existing models.

Motivated by sponsored search auctions with hard budget constraints given by the advertisers, we study multi-unit auctions of a single item. An important example is a sponsored result slot for a keyword, with many units representing its inventory in a month, say. In this single-item multi-unit auction, each bidder has a private value for each unit, and a private budget which is the total amount of money she can spend in the auction. A recent impossibility result [Dobzinski et al., FOCS’08] precludes the existence of a truthful mechanism with Pareto-optimal allocations in this important setting. We propose Sort-Cut, a mechanism which does the next best thing from the auctioneer’s point of view, that we term semitruthful. In our mechanism, it is a weakly dominant strategy for all agents to state their true budgets and to not understate their values.

In pay-per click sponsored search auctions which are currently extensively used by search engines, the auction for a keyword involves a certain number of advertisers (say k) competing for available slots (say m) to display their ads. This auction is typically conducted for a number of rounds (say T). There are click probabilities mu_ij associated with each agent-slot pairs. The goal of the search engine is to maximize social welfare of the advertisers, that is, the sum of values of the advertisers. The search engine does not know the true values advertisers have for a click to their respective ads and also does not know the click probabilities mu_ij s. A key problem for the search engine therefore is to learn these click probabilities during the T rounds of the auction and also to ensure that the auction mechanism is truthful. Mechanisms for addressing such learning and incentives issues have recently been introduced and are aptly referred to as multi-armed-bandit (MAB) mechanisms. When m = 1, characterizations for truthful MAB mechanisms are available in the literature and it has been shown that the regret for such mechanisms will be O(T^{2/3}). In this paper, we seek to derive a characterization in the realistic but non-trivial general case when m > 1 and obtain several interesting results.

A mediator is a well-known construct in game theory, and is an entity that plays on behalf of some of the agents who choose to use its services, while the rest of the agents participate in the game directly. We initiate a game theoretic study of sponsored search auctions, such as those used by Google and Yahoo!, involving {\em incentive driven} mediators. We refer to such mediators as {\em for-profit} mediators, so as to distinguish them from mediators introduced in prior work, who have no monetary incentives, and are driven by the altruistic goal of implementing certain desired outcomes. We show that in our model, (i) players/advertisers can improve their payoffs by choosing to use the services of the mediator, compared to directly participating in the auction; (ii) the mediator can obtain monetary benefit by managing the advertising burden of its group of advertisers; and (iii) the payoffs of the mediator and the advertisers it plays for are compatible with the incentive constraints from the advertisers who do dot use its services. A simple intuition behind the above result comes from the observation that the mediator has more information about and more control over the bid profile than any individual advertiser, allowing her to reduce the payments made to the auctioneer, while still maintaining incentive constraints. Further, our results indicate that there are significant opportunities for diversification in the internet economy and we should expect it to continue to develop richer structure, with room for different types of agents to coexist.

Abstract. The online advertising industry is currently based on two dominant business models: the pay-per-impression model and the pay-per-click model. With the growth of sponsored search during the last few years, there has been a move toward the pay-per-click model ...

In pay-per click sponsored search auctions which are currently extensively used by search engines, the auction for a keyword involves a certain number of advertisers (say k) competing for available slots (say m) to display their ads. This auction is typically conducted for a number of rounds (say T). There are click probabilities mu_ij associated with agent-slot pairs. The search engine's goal is to maximize social welfare, for example, the sum of values of the advertisers. The search engine does not know the true value of an advertiser for a click to her ad and also does not know the click probabilities mu_ij s. A key problem for the search engine therefore is to learn these during the T rounds of the auction and also to ensure that the auction mechanism is truthful. Mechanisms for addressing such learning and incentives issues have recently been introduced and would be referred to as multi-armed-bandit (MAB) mechanisms. When m = 1,characterizations for truthful MAB mechanisms ...

We initiate the study of an interesting aspect of sponsored search advertising, namely the consequences of broad match-a feature where an ad of an advertiser can be mapped to a broader range of relevant queries, and not necessarily to the particular keyword(s) that ad is associated with. Starting with a very natural setting for strategies available to the advertisers, and via a careful look through the algorithmic lens, we first propose solution concepts for the game originating from the strategic behavior of advertisers as they try to optimize their budget allocation across various keywords. Next, we consider two broad match scenarios based on factors such as information asymmetry between advertisers and the auctioneer, and the extent of auctioneer's control on the budget splitting. In the first scenario, the advertisers have the full information about broad match and relevant parameters, and can reapportion their own budgets to utilize the extra information; in particular, the auctioneer has no direct control over budget splitting. We show that, the same broad match may lead to different equilibria, one leading to a revenue improvement, whereas another to a revenue loss. This leaves the auctioneer in a dilemma - whether to broad-match or not. This motivates us to consider another broad match scenario, where the advertisers have information only about the current scenario, and the allocation of the budgets unspent in the current scenario is in the control of the auctioneer. We observe that the auctioneer can always improve his revenue by judiciously using broad match. Thus, information seems to be a double-edged sword for the auctioneer.

Abstract: In this paper, we describe the state-of-the-art in online advertising, addressing particularly the service innovation in the industry, at least partly developed as a solution to the crisis of the end 1990s. We claim that the approach based on cognitive intrusion does not fit the value ...

We investigate market forces that would lead to the emergence of new classes of players in the sponsored search market. We report a 3-fold diversification triggered by two inherent features of the sponsored search market, namely, capacity constraints and collusion-vulnerability of current mechanisms. In the first scenario, we present a comparative study of two models motivated by capacity constraints - one where the additional capacity is provided by for-profit agents, who compete for slots in the original auction, draw traffic, and run their own sub-auctions, and the other, where the additional capacity is provided by the auctioneer herself, by essentially acting as a mediator and running a single combined auction. This study was initiated by us in \cite{SRGR07}, where the mediator-based model was studied. In the present work, we study the auctioneer-based model and show that this model seems inferior to the mediator-based model in terms of revenue or efficiency guarantee due to added capacity. In the second scenario, we initiate a game theoretic study of current sponsored search auctions, involving incentive driven mediators who exploit the fact that these mechanisms are not collusion-resistant. In particular, we show that advertisers can improve their payoffs by using the services of the mediator compared to directly participating in the auction, and that the mediator can also obtain monetary benefit, without violating incentive constraints from the advertisers who do not use its services. We also point out that the auctioneer can not do very much via mechanism design to avoid such for-profit mediation without losing badly in terms of revenue, and therefore, the mediators are likely to prevail.

One natural constraint in the sponsored search advertising framework arises from the fact that there is a limit on the number of available slots, especially for the popular keywords, and as a result, a significant pool of advertisers are left out. We study the emergence of diversification in the adword market triggered by such capacity constraints in the sense that new market mechanisms, as well as, new for-profit agents are likely to emerge to combat or to make profit from the opportunities created by shortages in ad-space inventory. We propose a model where the additional capacity is provided by for-profit agents (or, mediators), who compete for slots in the original auction, draw traffic, and run their own sub-auctions. The quality of the additional capacity provided by a mediator is measured by its {\it fitness} factor. We compute revenues and payoffs for all the different parties at a {\it symmetric Nash equilibrium} (SNE) when the mediator-based model is operated by a mechanism currently being used by Google and Yahoo!, and then compare these numbers with those obtained at a corresponding SNE for the same mechanism, but without any mediators involved in the auctions. Such calculations allow us to determine the value of the additional capacity. Our results show that the revenue of the auctioneer, as well as the social value (i.e. efficiency), always increase when mediators are involved; moreover even the payoffs of {\em all} the bidders will increase if the mediator has a high enough fitness. Thus, our analysis indicates that there are significant opportunities for diversification in the internet economy and we should expect it to continue to develop richer structure, with room for different types of agents and mechanisms to coexist.

We describe a machine learning approach for predicting spon- sored search ad relevance. Our baseline model incorporates basic features of text overlap and we then extend the model to learn from past user clicks on advertisements. We present a novel approach using translation models to learn user click propensity from sparse click logs. Our relevance predictions are then applied to multiple sponsored search applications in both oine editorial eval- uations and live online user tests. The predicted relevance score is used to improve the quality of the search page in three areas: ltering low quality ads, more accurate rank- ing for ads, and optimized page placement of ads to reduce prominent placement of low relevance ads. We show signi- cant gains across all three tasks.

Nowadays, the Internet has had a rapid expansion and presence in all areas of the individuals, institutions, companies and organizations lives. This has made large extent of data available so that the users need to access their desired information or services through using search engines. To continue and promote providing services, search engines require a source of income. Sponsored search advertising is the main source of revenue for search engines. In sponsored search, limited areas of the search results page are dedicated to display advertising so that the advertiser pays the advertisement cost only per click. To assign advertising areas, an auction is run among advertisers. Several models have been proposed to hold a sponsored search auction. In this study, a new model is proposed to increase the revenue of the search engine. Evaluated using synthetic data, the results of the ad-supported implementation of the search engine model indicate improved revenue in comparison to exist...

In pay-per click sponsored search auctions which are currently extensively used by search engines, the auction for a keyword involves a certain number of advertisers (say k) competing for available slots (say m) to display their ads. This auction is typically conducted for a number of rounds (say T). There are click probabilities mu_ij associated with each agent-slot pairs. The goal of the search engine is to maximize social welfare of the advertisers, that is, the sum of values of the advertisers. The search engine does not know the true values advertisers have for a click to their respective ads and also does not know the click probabilities mu_ij s. A key problem for the search engine therefore is to learn these click probabilities during the T rounds of the auction and also to ensure that the auction mechanism is truthful. Mechanisms for addressing such learning and incentives issues have recently been introduced and are aptly referred to as multi-armed-bandit (MAB) mechanisms. When m = 1, characterizations for truthful MAB mechanisms are available in the literature and it has been shown that the regret for such mechanisms will be O(T^{2/3}). In this paper, we seek to derive a characterization in the realistic but non-trivial general case when m > 1 and obtain several interesting results.