Online advertisement service pricing and an option contract

Authors:
Yongma Moon;Changhyun Kwon
Affiliations:
College of Business Administration, University of Seoul, Korea;Department of Industrial and Systems Engineering, University at Buffalo (SUNY), USA
Venue:
Electronic Commerce Research and Applications
Year:
2011

Citing 10
Cited 2

Real options analysis of the timing of IS investment decisions

Information and Management
Performance bounds of algorithms for scheduling advertisements on a web page

Journal of Scheduling
Revenue Management of Flexible Products

Manufacturing & Service Operations Management
Implementing Sponsored Search in Web Search Engines: Computational Evaluation of Alternative Mechanisms

INFORMS Journal on Computing
Price Guarantees in Dynamic Pricing and Revenue Management

Operations Research
A Framework for Assessing the Business Value of Information Technology Infrastructures

Journal of Management Information Systems
Revenue Management of Callable Products

Management Science
Ex Ante Information and the Design of Keyword Auctions

Information Systems Research
Bidding to the top: VCG and equilibria of position-based auctions

WAOA'06 Proceedings of the 4th international conference on Approximation and Online Algorithms
Scheduling web banner advertisements with multiple display frequencies

IEEE Transactions on Systems, Man, and Cybernetics, Part A: Systems and Humans

Selling futures online advertising slots via option contracts

Proceedings of the 21st international conference companion on World Wide Web
Optimizing direct response in Internet display advertising

Electronic Commerce Research and Applications

Quantified Score

Hi-index	0.00

Visualization

Abstract

For the Internet advertisement market, we consider a contract problem between advertisers and publishers. Among several ways of pricing online advertisements, the methods based on cost-per-impression (CPM) and cost-per-click (CPC) are the two most popular. The CPC fee is proportional to the click-through rate (CTR), which is uncertain and makes decisions of advertisers and publishers difficult. In this paper, we suggest a hybrid pricing scheme: advertisers pay the minimum of CPM and CPC fees by purchasing an option from publishers. To determine the option price, we consider a Nash bargaining game for negotiation between an advertiser and a publisher and provide the solution. Further, we show that such option contracts will help the advertiser avoid high cost and the publisher generate more revenue. The option contract will also improve the contract feasibility, compared to CPM and CPC.