Online Advertisement Allocation in the Presence of Customer Choices

47 Pages Posted: 16 Mar 2020 Last revised: 17 Feb 2021

See all articles by Xiaolong Li

Xiaolong Li

affiliation not provided to SSRN

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Renyu (Philip) Zhang

New York University Shanghai

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

Date Written: February 17, 2021

Abstract

Advertisement, as a major revenue source of e-commerce platforms, is an important online marketing tool for sellers thereof. In this paper, we explore the dynamic ad allocation with limited slots upon each customer arrival for e-commerce platforms when the advertisers specify, for each ad, the budget constraint, the time periods when the ad should be displayed, and the click-through (lower-limit) constraint for certain customer segments. The goal of the platform is to maximize its payoff over the entire horizon. We propose a two-stage stochastic program framework in which the platform first decides the click-through goals for each ad/customer-type pair, and then devises the ad allocation policy to satisfy these goals in the second stage. We show that the optimal click-through goals can be achieved efficiently by solving a convex program, which can further reduce to a scalable linear program if the customer click-through behavior follows the multinomial logit model. Moreover, we provide a family of debt-weighted algorithms to achieve the optimal click-through goals, and prove that they are asymptotically optimal when the problem size scales to infinity. Compared to choice-based linear programming and its variant, our approach has better scalability and can deplete the ad budgets more smoothly throughout the horizon, which is very much desirable for the online advertising business in practice.

Keywords: Online Advertising Platform, Choice Models, Online Convex Optimization

Suggested Citation

Li, Xiaolong and Rong, Ying and Zhang, Renyu and Zheng, Huan, Online Advertisement Allocation in the Presence of Customer Choices (February 17, 2021). Available at SSRN: https://ssrn.com/abstract=3538755 or http://dx.doi.org/10.2139/ssrn.3538755

Xiaolong Li

affiliation not provided to SSRN

Ying Rong

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Renyu Zhang (Contact Author)

New York University Shanghai ( email )

1555 Century Avenue
Shanghai, 200122
China
86-21-20595135 (Phone)

HOME PAGE: http://https://rphilipzhang.github.io/rphilipzhang/index.html

Huan Zheng

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.535 Fahuazhen Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
55
Abstract Views
306
rank
433,762
PlumX Metrics