Sponsored Search Auctions with Markovian Users

Abstract. Sponsored search involves running an auction among advertisers who bid in order to have their ad shown next to search results for specific keywords. The most popular auction for sponsored search is the "Generalized Second Price" (GSP) auction where advertisers are assigned to slots in the decreasing order of their score, which is defined as the product of their bid and click-through rate. One of the main advantages of this simple ranking is that bidding strategy is intuitive: to move up to a more prominent slot on the results page, bid more. This makes it simple for advertisers to strategize. However this ranking only maximizes efficiency under the assumption that the probability of a user clicking on an ad is independent of the other ads shown on the page. We study a Markovian user model that does not make this assumption. Under this model, the most efficient assignment is no longer a simple ranking function as in GSP. We show that the optimal assignment can be fou...

• Type: Journal
• Year: 2008
• Where: CORR
• Authors: Gagan Aggarwal, Jon Feldman, S. Muthukrishnan, Martin Pal
• Keywords: Advertisers, Auction, CORR 2008, Education, Sponsored Search