Deals or No Deals: Contract Design for Online Advertising

41 Pages Posted: 19 Nov 2015 Last revised: 15 Nov 2018

See all articles by Anthony Kim

Anthony Kim

Columbia Business School - Decision Risk and Operations

Vahab Mirrokni

Google Inc.

Hamid Nazerzadeh

University of Southern California - Marshall School of Business

Date Written: November 19, 2015

Abstract

Billions of dollars worth of display advertising are sold via contracts and deals. This paper is the first formal study of preferred deals, a new generation of contracts for selling online advertisement that generalize the traditional reservation contracts; these contracts are suitable for advertisers with advanced targeting capabilities. We propose an approximation algorithm for maximizing the revenue that can be obtained from these deals. We evaluate our algorithm using data from Google's ad exchange platform. Our algorithm obtains about 90% of the optimal revenue. Furthermore, we show, both theoretically and via data analysis, that deals, with appropriately chosen minimum-purchase guarantees, can yield significantly higher revenue than auctions.

Suggested Citation

Kim, Anthony and Mirrokni, Vahab and Nazerzadeh, Hamid, Deals or No Deals: Contract Design for Online Advertising (November 19, 2015). Available at SSRN: https://ssrn.com/abstract=2693037 or http://dx.doi.org/10.2139/ssrn.2693037

Anthony Kim

Columbia Business School - Decision Risk and Operations ( email )

New York, NY
United States

Vahab Mirrokni

Google Inc. ( email )

1600 Amphitheatre Parkway
Second Floor
Mountain View, CA 94043
United States

Hamid Nazerzadeh (Contact Author)

University of Southern California - Marshall School of Business ( email )

Bridge Memorial Hall
Los Angeles, CA 90089
United States

HOME PAGE: http://www-bcf.usc.edu/~nazerzad/

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