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- W17303057 abstract "ABSTRACT We study a comprehensive framework for sponsored search which incorporates advertiser budgets, query frequency forecasts, and pricing and ranking schemes. We propose a linear program for optimizing revenue (or the total value to advertisers) that has an exponential number of variables; however, we describe how it can be solved efficiently using column generation. The formulation is easily extendable to various levels of problem complexity, adaptable to dynamic environments, fast, and works well in terms of practical considerations. Simulations show significant improvements in revenue and efficiency. Keywords: column generation, sponsored search, budgets, advertising (ProQuest: ... denotes formulae omitted.) 1. Introduction Electronic commerce is thriving [Kim 2004; Chen 2003; Alczak 2006] and one of the driving forces behind its success is internet advertising. Search engine companies earn millions of dollars every day by auctioning off advertisement slots. Internet advertising is primarily accomplished through Sponsored Search, ads placed on publisher pages and banner ads. In this paper we will primarily be concerned with Sponsored Search, but we note that scheduling of ads for third party publishers can benefit from a very similar treatment. In Sponsored Search there are several sources of data which must be considered. Firstly, there are the actual bids by advertisers for the search terms (queries), secondly the distribution of query frequencies and finally the advertiser budgets, when these are declared. The query frequencies limit the number of times a search engine can display its advertisers. Note that, unlike the bids and budgets, query frequencies are not under the control of the advertisers or, for that matter, of the search engine. It is well known [Silverstein 1999] that search engine query frequency distribution typically has relatively few queries with large volume and revenue, and a very large number of queries with extremely low volume. Therefore, we overcome most of the uncertainty in query volumes by selecting a relatively small subset of queries whose near-term volumes are easy to forecast, yet still constitute a large amount of the overall revenue. Advertisers or their agents, on the other hand, do have the ability to control their budgets. An advertiser's budget may constrain the number of times their ads appear, even when they have made a high bid on a query term. One might ask why they would wish to do so. There are several possible reasons, among them: protection against click-fraud, an over-all company advertising budget, and the desire to control the allocation of that budget between various media and campaigns. Whatever the reason, the search engine must determine which advertisers to display for which queries, given these constraints. Pricing and ranking are additional parameters of the system that influence revenue. The VCG mechanism [Vickrey 1961; Clarke 1971; Groves 1973] can be applied, but in practice search engines predominantly use the generalized second price (GSP) auction, described in more detail by Edelman et al. [Edelman 2006]. Advertisers are ranked according to the product of the price they bid for receiving a click, and a quality score. Each is charged a price per click equal to the minimum they would have had to pay to maintain their rank. The problem we consider is how to allocate advertisers to queries such that budget constraints are satisfied and efficiency or revenue is maximized. This problem is posed as a linear program that takes a global view, and coordinates advertiser spend across the chosen time-period, such as the next hour, or an entire day. With the combined knowledge of forecast query volumes, advertiser budgets, advertiser bids and the pricing and ranking algorithm, we formulate a comprehensive mathematical framework. Because of the flexibility of LP models, we are able to extend our approach beyond its original form to take onto consideration multi-level budgets, dynamic changes in the data, and a number of other practical extensions. …" @default.
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- W17303057 date "2008-02-01" @default.
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- W17303057 title "Ad Delivery with Budgeted Advertisers: A Comprehensive LP Approach" @default.
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