Optimising Trade-offs Among Stakeholders in Ad Auctions

TL;DR

This paper explores how to optimize trade-offs among stakeholders in ad auctions using GSP auctions with reserve prices, analyzing both short-term and long-term effects through simulations and real data.

Contribution

It introduces methods for optimizing stakeholder utilities in ad auctions, including constrained and multi-format scenarios, and analyzes the stability and welfare of auction mechanisms.

Findings

Optimizing linear combinations of utilities is feasible with GSP auctions.

Trade-offs between stakeholders can be effectively managed through constrained optimization.

Certain multi-format auction extensions lead to unstable equilibria or poor welfare.

Abstract

We examine trade-offs among stakeholders in ad auctions. Our metrics are the revenue for the utility of the auctioneer, the number of clicks for the utility of the users and the welfare for the utility of the advertisers. We show how to optimize linear combinations of the stakeholder utilities, showing that these can be tackled through a GSP auction with a per-click reserve price. We then examine constrained optimization of stakeholder utilities. We use simulations and analysis of real-world sponsored search auction data to demonstrate the feasible trade-offs, examining the effect of changing the allowed number of ads on the utilities of the stakeholders. We investigate both short term effects, when the players do not have the time to modify their behavior, and long term equilibrium conditions. Finally, we examine a combinatorially richer constrained optimization problem, where there are several possible allowed configurations (templates) of ad formats. This model captures richer ad formats, which allow using the available screen real estate in various ways. We show that two natural generalizations of the GSP auction rules to this domain are poorly behaved, resulting in not having a symmetric Nash equilibrium or having one with poor welfare. We also provide positive results for restricted cases.