Matching Value and Market Design in Online Advertising Networks: An Empirical Analysis

Chunhua Wu ()
Additional contact information
Chunhua Wu: Sauder School of Business, University of British Columbia, Vancouver, British Columbia V6T 1Z2, Canada

Marketing Science, 2015, vol. 34, issue 6, 906-921

Abstract: Advertising networks have recently played an increasingly important role in the online advertising market. Critical to the success of an advertising network are two mechanisms: an allocation mechanism that efficiently matches advertisers with publishers and a pricing scheme that maximally extracts surplus from the matches. In this paper, we quantify the value and investigate the determinants of a successful advertiser-publisher match, using data from Taobao’s advertising network. A counterfactual experiment reveals that the platform’s profit under a decentralized allocation mechanism is close to the profit level when the platform centrally assigns the matching under perfect platform knowledge of matching values. In another counterfactual experiment, we explore the effect of platform technology and revenue model on the strategic choice of the pricing schemes of list price versus generalized second price (GSP) auction pricing. We find that platforms that profit from the advertiser side may have less incentive to adopt GSP auction than platforms that profit from the publisher side.

Keywords: advertising network; matching game; maximum score estimation; generalized second price auction; platform design (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://dx.doi.org/10.1287/mksc.2015.0944 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:34:y:2015:i:6:p:906-921

Access Statistics for this article

More articles in Marketing Science from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().