Pay-Per-Action Model for On-line Advertising

  • Authors:
  • Mohammad Mahdian;Kerem Tomak

  • Affiliations:
  • Yahoo! Research Microeconomics and Social Systems Group;University of Texas, Austin

  • Venue:
  • International Journal of Electronic Commerce
  • Year:
  • 2008

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Abstract

The on-line advertising industry is based on two dominant business models: pay-per-impression and pay-per-click. The growth of sponsored search has fostered a move to the pay-per-click model because it is less risky for small advertisers. An alternative model, discussed but not widely used in the advertising industry, is pay-per-conversion, or more generally, pay-per-action. This paper discusses the challenges of designing mechanisms for the pay-per-action model and approaches to tackle some of them.