Implementing Sponsored Search in Web Search Engines: Computational Evaluation of Alternative Mechanisms

Informs Journal on Computing, Forthcoming

25 Pages Posted: 16 May 2005

See all articles by Juan Feng

Juan Feng

University of Florida - Warrington College of Business Administration

Hemant K. Bhargava

University of California, Davis

David M. Pennock

Microsoft Corporation - Microsoft Research, New York City

Abstract

The practice of sponsored search advertising - where advertisers pay a fee to appear alongside particularWeb search results - is now one of the largest and fastest growing source of revenue for Web search engines. We model and compare several mechanisms for allocating sponsored slots, including stylized versions of those used by Overture and Google, the two biggest brokers of sponsored search. The performance of these mechanisms depends on the degree of correlation between providers' willingness to pay and their relevance to the search term. Ranking providers based on the product of relevance and bid price performs well and is robust across varying degrees of correlation. Ranking purely based on bid price fares nearly as well when bids and relevance are positively correlated (the expected regime), and is further enhanced by adding an editorial filter. Regardless of the allocation mechanism, sponsored search revenues are lower when users' attention decays quickly at lower ranks, emphasizing the need to develop better user interfaces and control features. The search engine can address initial inscience of relevance scores by modifying rank allocations over time as it observes clickthroughs at each rank. We propose a rank-revision strategy that weights clicks on lower ranked items more than clicks on higher ranked items. This method is shown to converge to the optimal (maximum revenue) ordering faster and more consistently than other methods.

Keywords: Internet search engines, preferential placement, sponsored search, slot allocation

Suggested Citation

Feng, Juan and Bhargava, Hemant K. and Pennock, David M., Implementing Sponsored Search in Web Search Engines: Computational Evaluation of Alternative Mechanisms. Informs Journal on Computing, Forthcoming. Available at SSRN: https://ssrn.com/abstract=721262

Juan Feng (Contact Author)

University of Florida - Warrington College of Business Administration ( email )

Gainesville, FL 32611
United States

Hemant K. Bhargava

University of California, Davis ( email )

One Shields Avenue
Davis, CA 95616
United States

David M. Pennock

Microsoft Corporation - Microsoft Research, New York City ( email )

641 Avenue of Americas
New York, NY 10011
United States

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