Incorporating hidden costs of annoying ads in display auctions

Abstract

Media publisher platforms often face an effectiveness-nuisance tradeoff: more annoying ads can be more effective for some advertisers because of their ability to attract attention, but after attracting viewers' attention, their nuisance to viewers can decrease engagement with the platform over time. With the rise of mobile technology and ad blockers, many platforms are becoming increasingly concerned about how to improve monetization through digital ads while improving viewer experience.We study an online ad auction mechanism that incorporates a charge for ad impact on user experience as a criterion for ad selection and pricing. Like a Pigovian tax, the charge causes advertisers to internalize the hidden cost of foregone future platform revenue due to ad impact on user experience. Over time, the mechanism provides an incentive for advertisers to develop ads that are effective while offering viewers a more pleasant experience. We show that adopting the mechanism can simultaneously benefit the publisher, advertisers, and viewers, even in the short term.Incorporating a charge for ad impact can increase expected advertiser profits if enough advertisers compete. A stronger effectiveness-nuisance tradeoff, meaning that ad effectiveness is more strongly associated with negative impact on user experience, increases the amount of competition required for the mechanism to benefit advertisers.The findings suggest that the mechanism can benefit the marketplace for ad slots that consistently attract many advertisers.

Do Ads Harm News Consumption?

“…Clearly, such a tax should be considered cautiously, given the prevalence of the advertising business model in publishing and the potential to severely harm the publishing industry by further increasing its costs. For some recent discussion in that area, see Stourm and Bax (2017), Kerkhof and Münster (2015) and Nobel laureate Paul Romer (Romer 2019).…”

The Influence of Sociological Variables on Users’ Feelings about Programmatic Advertising and the Use of Ad-Blockers

“…This has been worsened by the changes in the advertising sector itself. Several studies have shown that annoying advertising, due to its ability to attract attention, can actually be more effective in the short term, but its impact and effectiveness considerably decrease in the long term [6].…”

“…However, this has become a massive phenomenon, and companies are now concerned about how to make advertising effective, rather than annoying for customers. An advertising campaign can fail if the users do not like it or feel negative about it for any reason [6]. Several studies have analyzed consumer attention to online advertising campaigns and how to attract more customers with them [7].…”

Heavy Tails Make Happy Buyers

“…In contrast, with a heavy-tailed distribution, adding bidders makes it more likely that an extreme right outlier bid will occur, boosting the winner's surplus as well as the seller's revenue. Valuation distribution shapes play a role in some other results about auctions, including determining whether imposing Pigovian taxes [21] on bidders to account for their negative externalities [1,4,9] can increase surplus for bidders as a class [27]. Heavy tails are also a topic of interest in the study of complexity theory [5,11,31,32], in marketing [2], in characterizing distributions based on samples [14,15,28], and in the study of a variety of physical and social phenomena [20,22,25,26].…”