Research Archive

Auctions for Online Display Advertising Exchanges: Approximations and Design

Santiago Balseiro, Omar Besbes, Gabriel Weintraub

Publication type: Working paper

Research Archive Topic: Media and Technology, Operations

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.
View research
View Ideas at Work: Feature

Citation

Balseiro, Santiago, Omar Besbes, and Gabriel Weintraub. "Auctions for Online Display Advertising Exchanges: Approximations and Design." Working Paper, Columbia University, September 19, 2012.


Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.