Auctions in the Online Display Advertising Chain: A Case for Independent Campaign Management
57 Pages Posted: 19 May 2017 Last revised: 13 Jun 2017
Date Written: June 5, 2017
In many auctions, buyers are represented by an intermediary that manages their bidding process, along with that of other buyers. Notably, this is prevalent in the real-time online display advertising market, in which advertisers bid for impressions through intermediaries called demand side platforms (DSPs). In turn, intermediaries, when bidding on behalf of their customers, strategize to maximize some internal objective and may only submit a single bid to limit competition on a given item. In the present paper, we propose a framework to analyze the implications of such a campaign coordination role by DSPs, taking as a benchmark the case in which each DSP would manage the bidding process of each advertiser it represents independently of other buyers, a case we refer to as multi-bidding. We show that the adoption of multi-bidding by all intermediaries would lead to an increase in both the social welfare and the seller's revenues. Furthermore, we analyze the impact on buyers in two regimes: i.) without competition among intermediaries and ii.) with competition, with a large number of intermediaries and buyers in an appropriate asymptotic regime. Quite remarkably, we establish that multi-bidding would also lead to an increase in the buyers' side surplus under a very broad set of market characteristics. In particular, as long as the average number of buyers interested in an item is moderate and the coefficient of variation of buyers' values is not too small, moving from coordinated campaigns to multi-bidding leads to a Pareto improvement in the value chain.
Keywords: Auction Design, Revenue Management, Value Chain, Intermediaries, Internet Display Advertising, Demand Side Platforms, Collusion
Suggested Citation: Suggested Citation