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EFFICIENT AUCTION MECHANISMS

FOR MOBILE ADS
− The Mobile Ad. Ecosystem
− Ad Inventory
− Different Auction Mechanisms
− Vickrey Auctions
− First price sealed bid auction
− Key Parameters
− Real Time Bidding
− Challenges
Agenda
Why Mobile Ads?
Source: http://techcrunch.com/tag/mobile-advertising/
And
The whole biz Model is based
on auctioning Mobile Ad
space!
The Mobile Advertising ecosystem
AD.
EXCHANGE
AD.
EXCHANGE
2
Advertisers
Apps (Users)
Ad Servers
That track users
With/Without
Cookies
INTERMEDIARIES
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RTB
EXCHANGE
AD.
EXCHANGE
1
AD AGGREGATORS AUCTIONEERS TARGET MARKET
Ad Networks
That aggregate
Demand
The Mobile Ad. Inventory
Interstitials
Extended Banners
Interactive Banner
Floating Banners
Types of Mobile Ad Auctions
− Vickrey auctions
− Pre-award auctions (PRE)
− Post-award auctions (POST)
− First price sealed bid auction (FPSB)
− Real Time Bidding
1. Reserve Price
2. Reserve Price
3. Bid prices 4. Bid prices
A
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Ad
Exchanges/
Ad Servers
Ad Networks
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Buyers
B
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5. Winner awarded 6. Winner awarded
7. Buyer pays 8. Intermediary pays
Bidding Auctions
* Direct bidding
by buyers
Key Parameters that influence
Click The act of clicking on an ad (banner or
text link) that has been served to a mobile
screen.
Click-Through The act of clicking on a banner
or text link ad, which takes the user through to
the advertiser’s site or other destination.
Used as a counterpoint to impressions to judge
the response-inducing power of the ad.
Click-Through-Rate (CTR) or Response rate
Expressed as a percentage and calculated by
taking the number of clickthroughs the ad
received, dividing that number by the number
of impressions and multiplying by 100 to obtain
a percentage:
Example: 20 clicks / 1,000 impressions = .02 x
100 = 2% CTR.
.
Key Parameters that influence
CPM (Cost Per Mille, Cost Per Thousand)
The price paid by an advertiser for a site displaying
their ad 1,000 times.
Cost per Click (CPC) The price paid by an advertiser
for a single click on its ad that
brings the end user to its intended destination.
eCPMA useful reporting metric for measuring
revenue generated across various marketing
channels, eCPM or effective cost per thousand
impressions is calculated by dividing total earnings
by the total number of impressions in thousands.
Example:, if a publisher earns US$200 from 40,000
impressions, the eCPM calculation would be
(US$200/40,000) x1000 giving an eCPM of US$5.00.
Key Parameters that influence
eCPC
eCPC is the effective cost of each click, calculated by
dividing total earnings by the total number of clicks.
Fill Rate
The percentage of ad requests that are filled with
ads (that is, where an ad is displayed to the end
user). Impression An impression is generated every
time an end user views an ad.
RPM
RPM or Revenue Per Mille is the earning (estimated
earnings) you will get for every 1000 impression.
Where CPM is the cost of ads for 1000 ad
impressions to advertiser, RPM is the revenue for
publisher from 1000 impressions. RPM is calculated
by dividing your possible estimated earnings by the
number of page views, impressions, or queries you
received, which is then multiplied by 1000.
Efficient Auction mechanisms for Mobile Ads
For : Ad Exchanges/Supply side platforms
− Optimal reserve price of Ad exchange depends both on the number of ad
networks and Advertisers/Publishers per ad networks.
− Optimal Reserve price increases with increase in number of advertisers/publisher
and ad networks participating in the auction
For : Ad Networks/Demand side platforms
− First-price sealed-bid auctions (FPSB) seem to provide a good trade-off between
revenue and efficiency.
− Ad Networks shall find FPSBs better than the other two auctions
For : Advertisers/Publishers
− For a non-captive advertiser/publisher, Post-award Vickrey auctions are preferred.
− For captive buyers, Pre-award Vickrey auctions are preferred
− Pre-award Vickrey auctions yield lower social welfare than the other auctions
Efficient Auction mechanisms for Mobile Ads
What Ad Exchanges/Supply side platforms want?
− More Ad Networks and RTBs each having more
advertisers/Publishers
− Revenue Focus : Want Ad Networks to implement POST Vickrey
auctions
What Ad Networks/Demand side platforms want?
− Higher expected profits : FPSB is the way to go compared to
POST
What Advertisers/Publishers want?
− Higher eCPM/Filling rates: Prefer POST over PRE award Vickrey
auctions.
− For captive buyers, Pre-award Vickrey auctions are preferred
Real Time Bidding
− Similar to Stock Market Operation
− Real Time bidding on ad impression basis
Real Time Bidding
− Cost Efficiency
− Targeted campaigns
− Purchase per impression
− Better Yield Management
− Increased revenue
− Better Ad Conversion
− Actionable Insights
− Better knowledge of Consumer
Context
− Identify Trends
− Retargeting
− Target Desired customers based
on Consumer Context
− Creative Optimization
− Personalized Advertisements
Increased
eCPM & ROI
Challenges today
− Lack of Transparency in margins earned by intermediaries
− RTB spend is yet to take off for many segments
− Mostly entertainment industry uses RTB now
− CMO challenges
− Faces issues in real time determination of customer
profitability before bidding
− Oversupply of ad inventory leading to lower prices
− Fallacy of TPV in second price auction
REFERENCES
Auctions with Intermediaries:
http://203.144.248.23/ACM.FT/1810000/1807346/p23-feldman.pdf
Auction Mechanisms for Demand-Side Intermediaries in Online Advertising
Exchanges
http://eprints.soton.ac.uk/363061/1/StavrogiannisGerdingPolukarovAAMAS2014.pdf
Competing Demand-Side Intermediary Auctioneers in Online Advertising
Exchanges
http://aamas2014.lip6.fr/proceedings/aamas/p1705.pdf
Apponomics
http://www.inmobi.com/apponomics/
Next-generation mobile ads: What is a demand-side platform (DSP) and real-
time bidding (RTB)?
http://mobithinking.com/what-is-mobile-dsp-and-rtb
Vickrey Auctions
http://en.wikipedia.org/wiki/Vickrey_auction
Thank you !
Q&A
Theory
• A Bayesian Nash
equilibrium is defined as a
strategy profile and beliefs
specified for each player
about the types of the
other players that
maximizes the expected
payoff for each player
given their beliefs about
the other players' types
and given the strategies
played by the other
players.

• In mechanism design, a process
is incentive-compatible if all of the
participants fare best when they truthfully
reveal any private information asked for by
the mechanism.
[1]
As an illustration, voting
systems which create incentives to vote
dishonestly lack the property of incentive
compatibility. In the absence of dummy
bidders, collusion, in complete information,
or other factors which interfere with process
efficiency, a second price auction is an
example of a mechanism that is incentive
compatible.
• There are different degrees of incentive-
compatibility: in some games, truth-telling
can be a dominant strategy. A weaker
notion is that truth-telling is a Bayes-Nash
equilibrium: it is best for each participant to
tell the truth, provided that others are also
doing so.