Optimal Bidding on Keyword Auctions

Authors: Brendan Kitts1; Benjamin Leblanc2

Source: Electronic Markets, Volume 14, Number 3, September 2004 , pp. 186-201(16)

Publisher: Routledge, part of the Taylor & Francis Group

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Abstract:

Pay per click (PPC) auctions are used to sell positions in search engines. These auctions have gained increasing commercial importance, and many companies offer software to bid on these auctions. We present a trading agent for PPC auctions that is the first in our knowledge to use an explicit profit objective function. The agent creates a look-ahead plan of its desired bids, which allows it to exhibit intelligent behaviour including the ability to hold back money during expensive periods. We tested the agent in the latter part of 2003 in a live Overture auction. The agent generated four times the number of visits as human managers, in addition to reducing cost and variability.

Keywords: PPC; pay per click; exploration; case study; agent; search engine

Document Type: Research article

DOI: 10.1080/1019678042000245119

Affiliations: 1: The University of Technology Sydney, Email: bkitts@excite.com 2: Computer Science and Geographic Information Systems bj_, Email: leblanc@hotmail.com

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