Sponsored search auctions: an overview of research with emphasis on game theoretic aspects

Abstract

We provide an overview of recent research that has been conducted on the design of sponsored search auctions. We mainly focus on game theoretic and mechanism design aspects of these auctions, and we analyze the issues associated with each of the three participating entities, i.e. the search engine, the advertisers, and the users of the search engine, as well as their resulting behavior. Regarding the search engine, we overview the various mechanisms that have been proposed including the currently used GSP mechanism. The issues that are addressed include analysis of Nash equilibria and their performance, design of alternative mechanisms and aspects of competition among search engines. We then move on to the advertisers and discuss the problem of choosing a bidding strategy, given the mechanism of the search engine. Following this, we consider the end users and we examine how user behavior may create externalities and influence the performance of the advertisers. Finally, we also overview statistical methods for estimating modeling parameters that are of interest to the three entities. In each section, we point out interesting open problems and directions for future research.

Auctions for online ad space among advertisers sensitive to both views and clicks

“…Those slots are sold through auctions; for more about such auctions, the reader is advised to look at [11]. In this paper, we consider that advertisers do not bid on each webpage separately: this is particularly true for ad banners in usergenerated webpages such as forums; advertisers cannot treat separately each forum and estimate how much to bid to place and ad.…”

“…CTR1 per click if Advertiser 1 obtains the slot [11]. Here, with both advertisers having the same CTR, the price per click is just the second-highest bid.…”

“…More precisely, for each page one would allocate slots to ads in order to maximize the "total declared value" of that allocation; and each • The second approach is inspired by the Generalized Second Price mechanism, which is extensively applied in sponsored search auctions [11,12]: as for VCG, the allocation is the most efficient one (in the sense of declared values); but the price each displayed advertiser pays is here the minimum one she could have declared and would have earned her the same slot. This approach is detailed in Subsection 4.2.…”

“…However, determining the best bidding strategies with GSP pricing is a complex problem, that is beyond the scope of this paper: we rather refer to [6,11,15] for works related to this issue of optimal bidding when GSP is used. When such bid shading (bidding below truthful valuation) is implemented by advertisers, different ads may be displayed, which can result in a loss in the match between viewers and the displayed ads.…”

“…For both of those payment types, appropriate pricing rules exist, and have been the subject of extensive research (see for example [11] and references therein). Note that some services use a fixed payment scheme (pay-per-click for most search engines like Google or Bing) while others (e.g., Facebook) leave the choice to the advertiser.…”