IC Mechanisms for Risk-Averse Advertisers in the Online Advertising System

TL;DR

This paper introduces a new auction mechanism for risk-averse advertisers in online advertising that maintains incentive compatibility during runtime by dynamically adjusting payments based on real-time outcomes, addressing discrepancies in existing systems.

Contribution

We propose the Decoupled First-Price Auction (DFP) mechanism and a PPO-based RL algorithm to ensure incentive compatibility during runtime for risk-averse advertisers.

Findings

DFP maintains incentive compatibility during runtime.

The RL algorithm effectively adjusts payments in real-time.

Experimental results validate the mechanism's effectiveness.

Abstract

The autobidding system generates huge revenue for advertising platforms, garnering substantial research attention. Existing studies in autobidding systems focus on designing Autobidding Incentive Compatible (AIC) mechanisms, where the mechanism is Incentive Compatible (IC) under ex ante expectations. However, upon deploying AIC mechanisms in advertising platforms, we observe a notable deviation between the actual auction outcomes and these expectations during runtime, particularly in the scene with few clicks (sparse-click). This discrepancy undermines truthful bidding among advertisers in AIC mechanisms, especially for risk-averse advertisers who are averse to outcomes that do not align with the expectations. To address this issue, we propose a mechanism, Decoupled First-Price Auction (DFP), that retains its IC property even during runtime. DFP dynamically adjusts the payment based on real-time user conversion outcomes, ensuring that advertisers' realized utilities closely approximate their expected utilities during runtime. To realize the payment mechanism of DFP, we propose a PPO-based RL algorithm, with a meticulously crafted reward function. This algorithm dynamically adjusts the payment to fit DFP mechanism. We conduct extensive experiments leveraging real-world data to validate our findings.