Strategic Bidding in Hybrid CPC/CPM Auctions

Yi Zhu () and Kenneth C. Wilbur ()
Additional contact information
Yi Zhu: Marshall School of Business, University of Southern California, http://www-scf.usc.edu/~zhuy
Kenneth C. Wilbur: Marshall School of Business, University of Southern California, http://www-rcf.usc.edu/~kwilbur

No 08-25, Working Papers from NET Institute

Abstract: Websites increasingly allow advertisers to choose whether to bid for advertising on a per-impression or per-click basis. We present the first analysis of this new hybrid auction market. The conventional wisdom in this industry is that brand advertisers (e.g., Coca-Cola) will bid for impressions, while direct response advertisers (e.g., Amazon.com) will bid for clicks. We find that in an auction setting similar to that used by Facebook and Google, brand advertisers may have an incentive to bid for clicks, while simultaneously lowering their click through rates. We suggest a variant on the current hybrid auction used in practice to incent brand advertisers to bid for impressions, which leaves the seller of online advertising weakly better off.

Keywords: Advertising; Auctions; Internet Marketing; Search Advertising (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mkt
Date: 2008-10, Revised 2008-10

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