Practice Prize Paper — PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising

Posted: 13 Nov 2013

See all articles by Bernd Skiera

Bernd Skiera

University of Frankfurt - Department of Marketing

Nadia Abou Nabout

Vienna University of Economics and Business

Abstract

This paper 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, we 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. A field experiment demonstrates that PROSAD can increase the return on investment by 21 percentage points and improve the yearly profit potential for SoQuero and its clients by €2.7 million.

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

Suggested Citation

Skiera, Bernd and Abou Nabout, Nadia, Practice Prize Paper — PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising. Marketing Science, Vol. 32, No. 2, 2013; pp. 213-220; DOI: 10.1287/mksc.1120.0735. Available at SSRN: https://ssrn.com/abstract=2328536

Bernd Skiera (Contact Author)

University of Frankfurt - Department of Marketing ( email )

Theodor-Adorno-Platz 4
Frankfurt am Main, 60323
Germany
+49 69 798 34640 (Phone)
+49 69 798 35001 (Fax)

HOME PAGE: http://www.skiera.de

Nadia Abou Nabout

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Vienna 1020
Austria
+43 1 31 336 4900 (Phone)
+43 1 31 336 90 4900 (Fax)

HOME PAGE: http://www.wu.ac.at/imsm/team/abounabout/

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