Keyword

Question 1

What prompted the initial use of keyword auctions?

Answer 1

• websites quickly started generating revenue from ads
• Originally just like ads in magazines or on billboards
  e.g. an advertiser rents space on page, price is for a fixed number of visitors
• In early 2000s realised that advertisers can target better viewers through cookies
• With search engines can know users’ interests in real time.

Question 2

What is the problem with generalised second price (GSP) auction where the winner is just the bidder with the highest bid?

Answer 2

A bidder with a higher bid, may not bring the most revenue to search engine. Revenue is a combination of clicks and bid.

Question 3

What 4 things does a quality score depend on?

Answer 3

• Click through rate (CTR)
• Ad relevence
• User experience
• Secret sauce

Question 4

Why is there no dominant strategy under GSP?

Answer 4

Getting a different place could get you a higher payoff

Question 5

Define locally envy-free

Answer 5

An equilibrium of the simultaneous-move game induced by GSP is locally envy-free if a player cannot improve their payoff by exchanging bids with the bidder one position above them.

Question 6

What is a stable assignment?

Answer 6

1) In a nash equilibrium
2) is locally envy-free

Question 7

What is a generalized English auction?

Answer 7

• Clock showing current price that is increasing from 0
• advertisers can drop out when they want, their bid is the price when they drop out.
• Auction is over when 2nd last drops out.

Question 8

Compare GSP and a generalised English auction

Answer 8

GSP is the simultaneous equivalent of the GEA

Question 9

What can you say about the payoff in an GEA and VCG?

Answer 9

The payoffs are the same

Question 10

What can be said about the revenue of the VCG auction and the GSP?

Answer 10

Revenue GSP >= VCG

Question 11

Why does facebook still use VCG?

Answer 11

• On FB more uncertainty on CTR. Using VCG means advertisers spend more time figuring out value of their VCG
• Life is simpler for advertisers
  -Revenue lower for facebook and higher for advertisers -> may be better in long term as advertisers may prefer facebook.
• Having very few ads per page limits computational issues.

Question 12

How is a stable assignment found in GSP?

Answer 12

Finding a long-run equilibrium of the repeated GSP game