NET Institute Working Paper #08-25, 2008
This paper analyzes the new hybrid auction where advertisers can bid on a per-impression or per-click basis.
Selling Internet space for advertisements is a multi-billion dollar industry. The information in this paper is helpful for sellers looking to maximize their profits.
- The unique and primary contribution of this paper is that it is the first paper to make a statement regarding equilibrium strategies in hybrid CPC/CPM auctions.
- In CPM (cost per thousand impressions) auctions, the advertisers bid for impressions and make payments each time their ad is displayed on a webpage.
- In CPC (cost per click) auctions, advertisers bid for clicks and pay only when their ad is clicked.
- The analysis that this paper uses differs from other papers in several key assumptions.
- This is the first paper to consider advertiser competition in type of bid as well as bid level.
- This paper assumes imperfect information about rival bidders’ profits, whereas most of the literature assumes perfect information.
- The writers of this paper are not aware of any previous paper to consider multiple types of advertisers, or to allow advertisers to influence their own click through rates.