Yield optimization of display advertising with Ad exchange

Santiago R. Balseiro, Jon Feldman, Vahab Mirrokni, S. Muthukrishnan

    Research output: Contribution to journalArticlepeer-review

    Abstract

    It is clear from the growing role of ad exchanges in the real-time sale of advertising slots that Web publishers are considering a new alternative to their more traditional reservation-based ad contracts. To make this choice, the publisher must trade off, in real-time, the short-term revenue from ad exchange with the long-term benefits of delivering good spots to the reservation ads. In this paper we formalize this combined optimization problem as a multiobjective stochastic control problem and derive an efficient policy for online ad allocation in settings with general joint distribution over placement quality and exchange prices. We prove the asymptotic optimality of this policy in terms of any arbitrary trade-off between the quality of delivered reservation ads and revenue from the exchange, and we show that our policy approximates any Pareto-optimal point on the quality-versus-revenue curve. Experimental results on data derived from real publisher inventory confirm that there are significant benefits for publishers if they jointly optimize over both channels.

    Original languageEnglish (US)
    Pages (from-to)2886-2907
    Number of pages22
    JournalManagement Science
    Volume60
    Issue number12
    DOIs
    StatePublished - Dec 1 2014

    Keywords

    • Dynamic programming-optimal control
    • Internet advertising
    • Revenue management

    ASJC Scopus subject areas

    • Strategy and Management
    • Management Science and Operations Research

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