PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising

Abstract:     
This article reports on a large-scale implementation of marketing science models to solve the bidding problem in search engine advertising. In cooperation with the online marketing agency SoQuero, the authors developed a fully automated bidding decision support system, PROSAD (profit optimizing search engine advertising), and implemented it through the agency’s bid management software. The PROSAD system maximizes an advertiser’s profit per keyword without the need for human intervention. A closed-form solution for the optimized bid and a newly developed 'costs per profit' heuristic enable advertisers to submit good bids even when there is significant noise in the data. An experiment demonstrates that PROSAD increases the return on investment by 21 percentage points and improves the yearly profit potential for SoQuero and its clients by 2.7€ million.

Keywords: decision support system, optimized bidding, search engine advertising, online advertising

Accepted Paper Series