Auctions for Online Display Advertising Exchanges: Approximations and Design

Santiago R. Balseiro (), Omar Besbes () and Gabriel Y. Weintraub ()
Additional contact information
Santiago R. Balseiro: Graduate School of Business, Columbia University
Omar Besbes: Graduate School of Business, Columbia University
Gabriel Y. Weintraub: Graduate School of Business, Columbia University

No 12-11, Working Papers from NET Institute

Abstract: Ad Exchanges are emerging Internet markets where advertisers may purchase display ad placements, in real-time and based on specific viewer information, directly from publishers via a simple auction mechanism. Advertisers join these markets with a pre-specified budget and participate in multiple second-price auctions over the length of a campaign. This paper studies the competitive landscape that arises in Ad Exchanges and the implications for publishers' decisions. Our first main contribution is to introduce the novel notion of a Fluid Mean Field Equilibrium (FMFE) that is behaviorally appealing, computationally tractable, and in some important cases yields a closed-form characterization. Moreover, we show that a FMFE approximates well the rational behavior of advertisers in large markets. Our second main contribution is to use this framework to provide sharp prescriptions for key auction design decisions that publishers face in these markets, such as the reserve price, the allocation of impressions to the exchange versus an alternative channel, and the disclosure of viewers' information. Notably, we show that proper adjustment of the reserve price is key in (1) making profitable for the publisher to try selling all impressions in the exchange before utilizing the alternative channel; and (2) compensating for the thinner markets created by greater disclosure of viewers' information.

Keywords: auction design; revenue management; ad exchange; display advertising; internet; budget constraints; dynamic games; mean field; fl uid approximation (search for similar items in EconPapers)
JEL-codes: C73 L86 (search for similar items in EconPapers)
Pages: 47 pages
Date: 2012-09
New Economics Papers: this item is included in nep-com, nep-gth and nep-ict
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.NETinst.org/Balseiro_12-11.pdf (application/pdf)
no

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:net:wpaper:1211

Access Statistics for this paper

More papers in Working Papers from NET Institute
Bibliographic data for series maintained by Nicholas Economides ().