9: Sponsored Search Auctions

Question 1

What are sponsored search auctions ?

Answer 1

Search engines offer businesses to pay for displaying their names and links in search results.

Sponsored ones are usually displayed above the ‘organic’ results, and receive more attention (and cost more).

Question 2

What is the per-impression model ?

Answer 2

It estimates the number of people exposed to ads.

Used in:

• Traditional media
• Online banners and brand ads

Question 3

What is the pay-per-click model?

Answer 3

A model where advertisers bid for places on a search page and pay only when a user clicks on their ads or pays.

It’s more suitable for direct marketers of specific products.

Question 4

What is a keyword auction ?

Answer 4

A bidding process for keywords, eg ‘Liverpool hotels’.

• Competitive and changing, eg buy flowers competitive before valentine’s day.
• Advertiser’s bid = max they pay per click/day/month

Question 5

Why are keyword ads a alternative to SEO ?

Answer 5

• Good placement on a search page leads to higher traffic and financial payoff
• Alternative way of obtaining prominent positioning
• Paying for sponsored slots
• Users can welcome ads related to searches

Question 6

Given an existing model of SSA ?

Answer 6

Any advertiser specifies a list of pairs and a daily or monthly maximum budget.

Everytime a user searches for a keyword, an auction takes place among interested advertisers who still have resources.

The search engine allocates the slots to the advertisers according to their bids.

Question 7

What is GFP auction and how does it work ?

Answer 7

Generalised First Price Auction.

Highest bidders get best slots. Everything logical and arithmetic.

Question 8

What is GSP auction and how does it work ?

Answer 8

A newer and more popular model based on GFP auction.

Rank bids by: bid*CTR

Slots are distributed to highest bidders still, but a bidder pays the lowest bid necessary to retain their position.

#1 pays the bid of #2*CTR of #2 / CTR of #1 
#2 pays the bid of #3*CTR of #3 / CTR of #2

Question 9

What is CTR and how does it work?

Answer 9

The probability the bidder’s ad is clicked.

Coca Cola’s CTR for ‘hotels’ is almost 0.

The bids therefore go to the one with the highest bid*CTR.

Question 10

Give 2 revenue models ?

Answer 10

• Per-impression model

- Pay-per-click model

Question 11

When does an auction take place ?

Answer 11

Everytime a user searches for a keyword.