Bypassing Performance Optimizers of Real Time Bidding Systems in Display Ad Valuation
Information Systems Research Forthcoming
28 Pages Posted: 4 Mar 2022
Abstract
Demand-side platforms (DSP) that purchase digital ad space using real-time bidding (RTB) systems employ “black-box” performance optimizers to adjust bids at run-time. Advertisers using field experiments to estimate the marginal value of display ads need to contend with the selective targeting of users by optimizers that adjust bids to target users with a greater propensity to respond favorably (e.g., click, conversions). In this paper, we propose an alternative approach for advertisers who choose to bypass their DSP’s performance optimizers for the purpose of assessing the value of their ads. We show that external frequency-caps that set upper limits on the number of ad impressions outside the purview of bidding algorithms can serve as a suitable instrumental variable. Eliminating performance optimizers allows the advertiser to value ads without relying on the support services of the DSP with the added benefit of a broader customer reach and a markedly lower cost. As the focal advertiser disables performance optimizers, any overbidding or underbidding vis-à-vis competition that employs them results in a negative correlation between the numbers of ad impressions won and their underlying quality at real-time. Using two large-scale randomized field experiments in different geographies (US and Asia) and different devices (PC and mobile), we validate the proposed approach and report a positive effect of ad impression count after adjusting for net-negative bias.
Keywords: Digital Display Advertisement, Advertising Effectiveness, Real-time Bidding, Programmatic Advertising, Field Experiment, Frequency Caps
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