Bid Optimization for Internet Graphical Ad Auction Systems via Special Ordered Sets

TL;DR

This paper presents a non-convex bid optimization model for web page advertisements, achieving near-optimal solutions efficiently and demonstrating significant financial benefits with a prototype system.

Contribution

It introduces a novel bid optimization model using special ordered sets and demonstrates effective solution methods for non-convex problems.

Findings

Achieved substantial financial gains with the prototype system.

Successfully obtained optimal or near-optimal solutions rapidly.

Demonstrated the practical effectiveness of the model in real-world settings.

Abstract

This paper describes an optimization model for setting bid levels for certain types of advertisements on web pages. This model is non-convex, but we are able to obtain optimal or near-optimal solutions rapidly using branch and cut open-source software. The financial benefits obtained using the prototype system have been substantial.