research-article

Multi-Keyword Multi-Click Advertisement Option Contracts for Sponsored Search

Authors:

Ingemar J. Cox,

Mohan S. KankanhalliAuthors Info & Claims

ACM Transactions on Intelligent Systems and Technology (TIST), Volume 7, Issue 1

Article No.: 5, Pages 1 - 29

https://doi.org/10.1145/2743027

Published: 01 October 2015 Publication History

Abstract

In sponsored search, advertisement (abbreviated ad) slots are usually sold by a search engine to an advertiser through an auction mechanism in which advertisers bid on keywords. In theory, auction mechanisms have many desirable economic properties. However, keyword auctions have a number of limitations including: the uncertainty in payment prices for advertisers; the volatility in the search engine’s revenue; and the weak loyalty between advertiser and search engine. In this article, we propose a special ad option that alleviates these problems. In our proposal, an advertiser can purchase an option from a search engine in advance by paying an upfront fee, known as the option price. The advertiser then has the right, but no obligation, to purchase among the prespecified set of keywords at the fixed cost-per-clicks (CPCs) for a specified number of clicks in a specified period of time. The proposed option is closely related to a special exotic option in finance that contains multiple underlying assets (multi-keyword) and is also multi-exercisable (multi-click). This novel structure has many benefits: advertisers can have reduced uncertainty in advertising; the search engine can improve the advertisers’ loyalty as well as obtain a stable and increased expected revenue over time. Since the proposed ad option can be implemented in conjunction with the existing keyword auctions, the option price and corresponding fixed CPCs must be set such that there is no arbitrage between the two markets. Option pricing methods are discussed and our experimental results validate the development. Compared to keyword auctions, a search engine can have an increased expected revenue by selling an ad option.

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Cited By

Du JWen GLiang X(2024)Estimating the Complier Average Causal Effect with Non-Ignorable Missing Outcomes Using Likelihood AnalysisMathematics10.3390/math1209130012:9(1300)Online publication date: 25-Apr-2024
https://doi.org/10.3390/math12091300
Abbasi KKhan THaq I(2021)Modeling-framework for model-based software engineering of complex Internet of things systemsMathematical Biosciences and Engineering10.3934/mbe.202145818:6(9312-9335)Online publication date: 2021
https://doi.org/10.3934/mbe.2021458
Chen BKankanhalli M(2019)Pricing Average Price Advertising Options When Underlying Spot Market Prices Are DiscontinuousIEEE Transactions on Knowledge and Data Engineering10.1109/TKDE.2018.286702731:9(1765-1778)Online publication date: 1-Sep-2019
https://doi.org/10.1109/TKDE.2018.2867027
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Index Terms

Multi-Keyword Multi-Click Advertisement Option Contracts for Sponsored Search
1. Applied computing
  1. Law, social and behavioral sciences
    1. Economics

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Published In

cover image ACM Transactions on Intelligent Systems and Technology

ACM Transactions on Intelligent Systems and Technology Volume 7, Issue 1

October 2015

293 pages

ISSN:2157-6904

EISSN:2157-6912

DOI:10.1145/2830012

Editor:
Yu Zheng
Microsoft Research, China

Issue’s Table of Contents

Copyright © 2015 ACM.

Permission to make digital or hard copies of all or part of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, or republish, to post on servers or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from [email protected]

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Publication History

Published: 01 October 2015

Accepted: 01 March 2015

Revised: 01 December 2014

Received: 01 April 2014

Published in TIST Volume 7, Issue 1

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Cited By

Du JWen GLiang X(2024)Estimating the Complier Average Causal Effect with Non-Ignorable Missing Outcomes Using Likelihood AnalysisMathematics10.3390/math1209130012:9(1300)Online publication date: 25-Apr-2024
https://doi.org/10.3390/math12091300
Abbasi KKhan THaq I(2021)Modeling-framework for model-based software engineering of complex Internet of things systemsMathematical Biosciences and Engineering10.3934/mbe.202145818:6(9312-9335)Online publication date: 2021
https://doi.org/10.3934/mbe.2021458
Chen BKankanhalli M(2019)Pricing Average Price Advertising Options When Underlying Spot Market Prices Are DiscontinuousIEEE Transactions on Knowledge and Data Engineering10.1109/TKDE.2018.286702731:9(1765-1778)Online publication date: 1-Sep-2019
https://doi.org/10.1109/TKDE.2018.2867027
Abbasi KKhan THaq I(2019)Hierarchical Modeling of Complex Internet of Things Systems Using Conceptual Modeling ApproachesIEEE Access10.1109/ACCESS.2019.2930933(1-1)Online publication date: 2019
https://doi.org/10.1109/ACCESS.2019.2930933
Chen BWang J(2018)A lattice framework for pricing display advertisement options with the stochastic volatility underlying modelElectronic Commerce Research and Applications10.1016/j.elerap.2015.07.00214:6(465-479)Online publication date: 21-Dec-2018
https://dl.acm.org/doi/10.1016/j.elerap.2015.07.002
Chen XChen BKankanhalli MKando NSakai TJoho HLi Hde Vries AWhite R(2017)Optimizing Trade-offs Among Stakeholders in Real-Time Bidding by Incorporating Multimedia MetricsProceedings of the 40th International ACM SIGIR Conference on Research and Development in Information Retrieval10.1145/3077136.3080802(205-214)Online publication date: 7-Aug-2017
https://dl.acm.org/doi/10.1145/3077136.3080802
Chen B(2016)Risk-Aware Dynamic Reserve Prices of Programmatic Guarantee in Display Advertising2016 IEEE 16th International Conference on Data Mining Workshops (ICDMW)10.1109/ICDMW.2016.0079(511-518)Online publication date: Dec-2016
https://doi.org/10.1109/ICDMW.2016.0079

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