Budget Planning for Coupled Campaigns in Sponsored Search Auctions

Yanwu Yang, Rui Qin, Bernard J. Jansen, Jie Zhang, Daniel Zeng
2014 International Journal of Electronic Commerce  
Budget-related decisions in sponsored search auctions are recognized as a structured decision problem rather than a simple constraint. Budget planning over several coupled campaigns (e.g., substitution and complementarity) remains a challenging but important task for advertisers. In this paper, we propose a dynamic multicampaign budget planning approach using optimal control techniques, with consideration of the substitution relationship between advertising campaigns. A three-dimensional
more » ... of substitution relationships between campaigns is presented, namely, the overlapping degree in terms of campaign contents, promotional periods, and target regions. We also study some desirable properties and possible solutions to our budget model. Computational simulations and experiments are conducted to evaluate our model using real-world data from practical campaigns in sponsored search auctions. Experimental results show that (1) our approach outperforms the baseline strategy that is commonly used in practice; (2) coupled campaigns with a higher overlapping degree in between reduce the optimal total budget level, then reduce the optimal payoff, and reach the budgeting cap earlier than those with a less overlapping degree; and (3) the advertising effort can be seriously weakened by ignoring the degree of overlapping between campaigns. KEY WORDS AND PHRASES: Advertising campaigns, budget planning decision analysis, online advertising, operations research in marketing, optimal control, sponsored search, sponsored search auctions. Sponsored search auctions have become the most successful online marketing model (www.iab.net/media/file/IABInternetAdvertisingRevenue ReportFY2012POSTED.pdf), accounting for 46.3 percent of revenues of online advertisements in 2012 (http://papers.ssrn.com/sol3/papers.cfm?abstract_ id=1544580/). More and more advertisers are choosing sponsored search auctions to promote their products or services [14] . Sponsored search auctions form the dominating revenue resource for major search engine companies (e.g., Google gained 92.7 percent of its revenues from search advertisements in the first quarter of 2013). One of the most difficult tasks for advertisers is effectively determining and allocating the optimal level of advertising budget in search advertisements. Budget is an endogenous factor in search advertisements, heavily constraining other advertising strategies [24] . Moreover, budget-related decisions in sponsored search auctions are recognized as a structured decision problem,
doi:10.2753/jec1086-4415180302 fatcat:3iiolv5uyrdjxmucc5tpix263a