Title: | Hybrid Advertising Auctions |
Authors: | Wilbur, Kenneth C. - University of Southern California Zhu, Yi - University of Southern California |
Keywords: | Advertising, Auctions, Internet Marketing, Search Advertising |
Issue Date: | 2008 |
Series/Report no.: | Net Institute Working Paper;08-25 |
Abstract: | Several major websites offer hybrid auctions that allow advertisers to bid on a per-impression or a per-click basis. We present the first analysis of this hybrid advertising auction setting. The conventional wisdom is that brand advertisers (e.g. Coca-Cola) will bid per impression, while direct response advertisers (e.g. Amazon.com) will bid per click. We analyze a theoretical model of advertiser bidding to ask whether this conventional wisdom will hold up in practice. We find the opposite in a static game: brand advertisers bid per click, while direct response advertisers bid per impression. In a more realistic repeated game, we find that direct response advertisers bid per click, but brand advertisers may profitably alternate between bidding for clicks and bidding for impressions. The analysis implies that sellers of online advertising (a) may sometimes prefer not to offer advertisers multiple bidding options, (b) should try to ascertain advertisers' types when they do use hybrid auctions, and (c) should consider advertisers' strategic incentives when forming click-through rate expectations in hybrid auction formats. |
URI: | http://hdl.handle.net/2451/29453 |
Appears in Collections: | NET Institute Working Papers Series |
Files in This Item:
File | Description | Size | Format | |
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Zhu_Wilbur_08-25.pdf | 542.66 kB | Adobe PDF | View/Open |
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