AdWords and Generalized On-line Matching
FOCS '05 Proceedings of the 46th Annual IEEE Symposium on Foundations of Computer Science
Truthful auctions for pricing search keywords
EC '06 Proceedings of the 7th ACM conference on Electronic commerce
Predicting clicks: estimating the click-through rate for new ads
Proceedings of the 16th international conference on World Wide Web
Contract Auctions for Sponsored Search
WINE '09 Proceedings of the 5th International Workshop on Internet and Network Economics
A novel click model and its applications to online advertising
Proceedings of the third ACM international conference on Web search and data mining
Mathematical modeling of competition in sponsored search market
Proceedings of the 2010 Workshop on Economics of Networks, Systems, and Computation
Value of learning in sponsored search auctions
WINE'10 Proceedings of the 6th international conference on Internet and network economics
An expressive mechanism for auctions on the web
Proceedings of the 20th international conference on World wide web
Marketing Science
Impression-plus-click auctions
ACM SIGecom Exchanges
The pathologies of online display advertising marketplaces
ACM SIGecom Exchanges
Predictive client-side profiles for personalized advertising
Proceedings of the 17th ACM SIGKDD international conference on Knowledge discovery and data mining
Sponsored search auctions: an overview of research with emphasis on game theoretic aspects
Electronic Commerce Research
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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: 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. 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 per-impression bid can result in significantly higher revenue. 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. The hybrid auction can allow the advertiser and auctioneer to implement complex dynamic programming strategies to deal with the uncertainty in the click-probability 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. As Internet commerce matures, we need more sophisticated pricing models to exploit all the information held by each of the participants. We believe that hybrid auctions could be an important step in this direction. The hybrid auction easily extends to multiple slots, and is also applicable to scenarios where the hybrid bidding is per-impression and per-action (i.e. CPM and CPA), or per-click and per-action (i.e. CPC and CPA).