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Proposal for CCS Project (Term VI)

Submitted to
Professor Sreelata Jonnalagedda
Indian Institute of Management, Bangalore
For
Auction of Auctions Study in
Post Graduate Diploma in Management Program 2014-16
On
October 16, 2015

Title of the CCS


Study of Auction Methodologies to Maximize Revenues in Related Auctions.
Name of the Guide
Professor Sreelata Jonnalagedda
Names and Roll numbers of the Students
Anand Krishnan

Sambit Rath

1411278

1411262

PGP 2014-16

PGP 2014-16

Need for the proposed work:


Mobile devices have become the new frontier for marketing. Companies like Facebook
& Google also develop products first for mobile platform and then extend them to other
platforms later on. As of December 2013, Facebook has around 945 million users on
mobile. According to the research firm Gartner, Mobile advertisement spending in the
Global arena is forecasted to reach $41.9 billion, by 2017 up from $18 billion in 2014. 1
InMobi is a mobile advertisement network, which helps consumers to discover desired
and new products through mobile advertisement. It has a discovery platform known as
Miip, which is one of the largest discovery platforms in the world. InMobi manages over
100 billion sessions on mobiles and has a reach of over a billion users all over the
world.
Traditionally in mobile advertisement, advertisements are rarely directed to right
category of people at the right moment in time. It gets arduous to study the behavior of
people. People also tend to get irritated when they are presented with irrelevant ads.
InMobi on the other hand, works on the basic principle that the advertisements must
target people, not the device. It tries to understand user behavior, and helps large
brands deliver the advertisements to correct customers, at the right time using on the fly
linking of ad media.
Ad Spot Marketplace:
InMobi has a marketplace which is accessed by thousands of advertisers and
publishers. Over two billion transactions are conducted per day. 2 Ad spots are acquired
by InMobi through long term contracts through sites and ad exchange auctions. The
methodology used to figure out the bid value in the auctions can be further optimized
and the purpose of this CCS is to find the optimal bidding strategy.

Objectives:
The key objectives of this CCS are,
1. Studying relationship between internal and external auctions.
2. Studying contemporary auction methodologies used in key industrial sectors with
a special focus on online advertisement platforms.
3. Analysis of the impact on auction revenues w.r.t choice of auction methodologies
(first price, second price etc.) in real-life market offerings.
4. Analysis of the impact on overall revenue from external auctions w.r.t choice of
auction methodology used in related (preceding) internal auction.

http://www.inmobi.com/company/news/inmobi-decoded-how-bangalore-based-firm-is-taking-on-google-andfacebook/
2
http://www.inmobi.com/company/current-openings/technology-team/jobid/79828

Brief description of the CCS:


The objectives of auctions can be studied in two perspectives sellers & bidders there
will also be some common objectives, to list down some of the key points;
Seller Perspective:

Maximize revenues
Optimize participation of relevant bidders
Aggregated trading platform that cannot be gamed
Minimize unsold inventory as these are perishable items

Bidder Perspective:

Maximize profit
Access to relevant products
Avoid creating seller monopolies

Common Objectives:

Ensure secure & reliable transactions


Easy & transparent access to all parties involved

As part of this study the main objective of the auction will be assumed to be only
maximizing revenue.
InMobi, being the leading mobile advertising network in the emerging markets acquires
ad spot inventory through contractual purchases and ad exchange auctions. The
proportion of contractual purchases and more near term auctions normally depend upon
the estimated volatility of inventory pricing and availability.
InMobi traditionally determines the inventory bid value through internal auctions; this
suggests that InMobi doesnt treat these ad spots as common value objects but rather
private/hybrid value objects. InMobis choice of determining the final bid value of the ad
spots through internal auctions could be due to information asymmetry, asset synergies
etc. The choice of a second price auction model leaves each bidder with a dominant
strategy and hence is easier to manage. First price auctions on the other hand allow a
tradeoff between risk of losing Vs profit maximization but it requires much more in-depth
knowledge of all the bidders and their possible valuations to make an effective bidding
strategy.
The purpose of this study is to ascertain the best internal auction methodology to be
utilized for revenue maximization or can internal auctions be replaced by more effective
ulterior valuation methods.

Methodology:
Our CCS project would involve,

Primary research into understanding why InMobi feels the need for internal
auctions.
Primary & secondary research into understanding the impact of different auction
methodologies on the external auction revenues.
Exploratory analysis to uncover possible alternatives to internal auctions.
Critical analysis of the identified factors/data from primary, secondary and
exploratory research to understand relationships, implications and arrive at
logical conclusions.
Provide recommendations based on empirical research and analysis.

Timeline & Deliverables:


The timeline of deliverables are outlined below,
S.No
1

Planned Activity
Interim Report Submission

Final Report Submission

Schedule
Week 5
Jan 04, 2016
Week 11
Feb 29, 2016

Expected outcome:
The CCS project would identify optimal valuation ad spot methods for external bidding
processes for advertisement networks.

References:
Books

Watson, Joel : Strategy, An Introduction to Game Theory

Articles

Edelman et al 2005: Internet Advertising and the GSP Auction


Binmore, Ken, and Paul Klemperer. 2002. The Biggest Auction Ever: The Sale
of the British 3G Telecom Licenses.

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