Online Allocation and Display Ads Optimization with Surplus Supply

TL;DR

This paper introduces a new supply factor concept to optimize publisher revenue across guaranteed contracts and ad exchanges, providing a simple algorithm with an optimal competitive ratio that adapts to supply conditions.

Contribution

It presents a fast deterministic algorithm for online ad allocation with an optimal competitive ratio based on the supply factor, extending classic online matching problems.

Findings

Optimal competitive ratio depends on supply factor, penalty, and bid distribution.

Supply factor improves approximation ratios from 1-1/e to near 1 as it increases.

The algorithm's competitive ratio is proven to be tight.

Abstract

In this work, we study a scenario where a publisher seeks to maximize its total revenue across two sales channels: guaranteed contracts that promise to deliver a certain number of impressions to the advertisers, and spot demands through an Ad Exchange. On the one hand, if a guaranteed contract is not fully delivered, it incurs a penalty for the publisher. On the other hand, the publisher might be able to sell an impression at a high price in the Ad Exchange. How does a publisher maximize its total revenue as a sum of the revenue from the Ad Exchange and the loss from the under-delivery penalty? We study this problem parameterized by \emph{supply factor $f$}: a notion we introduce that, intuitively, captures the number of times a publisher can satisfy all its guaranteed contracts given its inventory supply. In this work we present a fast simple deterministic algorithm with the optimal competitive ratio. The algorithm and the optimal competitive ratio are a function of the supply factor, penalty, and the distribution of the bids in the Ad Exchange. Beyond the yield optimization problem, classic online allocation problems such as online bipartite matching of [Karp-Vazirani-Vazirani '90] and its vertex-weighted variant of [Aggarwal et al. '11] can be studied in the presence of the additional supply guaranteed by the supply factor. We show that a supply factor of $f$ improves the approximation factors from $1-1/e$ to $f-fe^{-1/f}$. Our approximation factor is tight and approaches $1$ as $f \to \infty$.