Sustaining a Good Impression: Mechanisms for Selling Partitioned Impressions at Ad-Exchanges

Information Systems Research, Vol. 31, No. 1, March 2020, pp. 126–147

54 Pages Posted: 6 Nov 2017 Last revised: 10 Feb 2021

See all articles by Sameer Mehta

Sameer Mehta

Rotterdam School of Management, Erasmus University

Milind Dawande

University of Texas at Dallas - Department of Information Systems & Operations Management

Ganesh Janakiraman

University of Texas at Dallas - Naveen Jindal School of Management

Vijay Mookerjee

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: November 2, 2017

Abstract

In the mobile advertising ecosystem, the role of ad-exchanges to match advertisers and publishers has grown significantly over the past few years. At a mobile ad-exchange, impressions (i.e., opportunities to display ads) are sold to advertisers in real time through an auction mechanism. The traditional mechanism selects a single advertiser whose ad is displayed over the entire duration of an impression, i.e., throughout the user's visit. We argue that such a mechanism leads to an allocative inefficiency, as displaying only the winning ad throughout the lifetime of an impression precludes the exchange from exploiting the opportunity to obtain additional revenue from advertisers whose willingness-to-pay becomes higher during the lifetime of that impression. Our goal in this paper is to address this efficiency loss by offering mechanisms in which multiple ads can be displayed sequentially over the lifetime of the impression. We consider two plausible settings – one, where each auction is individually rational for the advertisers and the other, where advertisers are better off relative to the traditional mechanism over the long run – and derive an optimal (i.e., revenue-maximizing for the ad-exchange) mechanism for each setting. To efficiently compute the payment rule, the optimal mechanism for the former setting uses randomized payments. Under this mechanism, while the ad-exchange always benefits relative to the traditional mechanism, the advertisers could either gain or lose – we demonstrate both these possibilities. The optimal mechanism for the latter setting is a "mutually-beneficial" mechanism in that it guarantees a win-win for both the parties relative to the traditional mechanism, over the long run. Happily, for both the mechanisms, the allocation of ads and the payments from the advertisers are efficiently computable, thereby making them amenable to real-time bidding.

Keywords: Mobile Advertising, Ad-Exchanges, Optimal Mechanisms, Mutually-Beneficial Mechanisms

JEL Classification: D82, D44, D47, M37

Suggested Citation

Mehta, Sameer and Dawande, Milind and Janakiraman, Ganesh and Mookerjee, Vijay, Sustaining a Good Impression: Mechanisms for Selling Partitioned Impressions at Ad-Exchanges (November 2, 2017). Information Systems Research, Vol. 31, No. 1, March 2020, pp. 126–147, Available at SSRN: https://ssrn.com/abstract=3064299 or http://dx.doi.org/10.2139/ssrn.3064299

Sameer Mehta (Contact Author)

Rotterdam School of Management, Erasmus University ( email )

RSM Erasmus University
PO Box 1738
Rotterdam, 3062 PA
Netherlands

Milind Dawande

University of Texas at Dallas - Department of Information Systems & Operations Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Ganesh Janakiraman

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

Vijay Mookerjee

University of Texas at Dallas - Naveen Jindal School of Management ( email )

P.O. Box 830688
Richardson, TX 75083-0688
United States

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