1 / 32

Q2: How does Google sell ad spaces?

Q2: How does Google sell ad spaces? . Mung Chiang Networks: Friends, Money, and Bytes . How to sell online ad spaces?. Different goals: Seller vs. Buyers 1994: Impression-based ($ per 1000 impressions) 1997: Click-based 2002: Auction-based Google AdWords

bobby
Download Presentation

Q2: How does Google sell ad spaces?

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Q2: How does Google sell ad spaces? Mung Chiang Networks: Friends, Money, and Bytes

  2. How to sell online ad spaces? • Different goals: Seller vs. Buyers • 1994: Impression-based ($ per 1000 impressions) • 1997: Click-based • 2002: Auction-based • Google AdWords • Search advertisements / sponsored content

  3. Question 1 • Where will your ad appear? • Different spots have different values • Each has an expected clickthrough rate C • Assume R is independent of the ad placed there

  4. Question 2 • How do advertisers pay Google? • When you actually click • Assume actual clickthrough rate is also C

  5. Question 3 • What’s in it for the advertisers? • Revenue depends on • C: average clicks per hour • R: average revenue per click • C * R: average revenue in dollar per hour • Call this the valuation of the ad space to the buyer

  6. Auction • From Roman Empire to eBay and Google • 1 seller (Google) • N buyers (advertisers) • K items (ad spaces) • Buyers: submit bids • Seller: • Allocate items to buyers • Charge each buyer

  7. Single item public auction • Ascending price • Descending price

  8. Single item sealed envelope • First price • Second price • Does it make sense?

  9. Multiple items • Generalized Second Price (GSP) • Vickrey–Clarke—Groves (VCG)

  10. Why auctions? • Resource allocation • Private valuation • Independent valuation

  11. What does each party want? • Seller: revenue • Buyers: payoff • Auction designer: • Efficient and fair • Truthful bidding

  12. Auction as a game • Set of players • Strategy space per player • Payoff function per player

  13. Designing an auction • Different auction rules induce different bidding behaviors • First price: • Second price:

  14. Second price (single item) • Decoupling of allocation and pricing • Truthful bidding is a dominant strategy: b=v • Why not b < v ? • Why not b > v ?

  15. Still a mystery? • Why not third price? • Anything special about second price? • Internalize the negative externality • Pay for what you damaged

  16. eBay • Second price with 4 twists: • (Optional, secret) reserve price • Some information displayed • Fixed and public horizon • Proxy agent

  17. Example: Day 0 • Duration: 5 days • Start price: $5 • Minimal increment: $1 • Reserve price: $5

  18. Day 1 • Alice users proxy agent • Maximum bid: $12 • Highest bid: • Ask price:

  19. Day 2 • Bob bids $8 • Highest bid: • Ask price:

  20. Day 3 • Bob bids $10.5 • Highest bid: • Ask price:

  21. Day 4 • Bob bids $17.5 • Highest bid: • Ask price:

  22. Day 5 • Chris bids $18 • Highest bid: • Ask price:

  23. End • Winner: • Price:

  24. Second price (multiple items)

  25. GSP • Bidding: • Allocation: • Charging:

  26. Detour • Why not let each buyer submit multiple bids? (not just all multiples of a common number R) • Other types of bipartite graphs and matching

  27. Example • Bidding: Assume truthful • Allocation: • Charging:

  28. Example • Revenue to Google: • Payoffs to buyers: • Total payoff:

  29. GSP or VCG? • Beyond Google ad search: e.g., AppNexus • Truthful bidding • Simplicity of explanation • Multiple parallel auctions • Irrational behavior

  30. Variants we have seen

  31. Many more we haven’t • Simultaneous auctions • Reverse auctions • Multiple winner auctions • …

  32. Summary • Auctions allocate items among competing buyers • Different auction rules induce different bidding behavior • Pricing based on externality induces truthful bidding

More Related