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Online Advertisement Publishing – Which Pricing Model is the best?. Jason Deane Stochastic Optimization Project Professor: Dr. Uraysev Wednesday, December 7 th , 2005. Talk Outline. Research Motivation Online Advertising – Industry Terminology Model Formulations Deterministic

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online advertisement publishing which pricing model is the best
Online Advertisement Publishing – Which Pricing Model is the best?

Jason Deane

Stochastic Optimization Project

Professor: Dr. Uraysev

Wednesday, December 7th, 2005

talk outline
Talk Outline
  • Research Motivation
  • Online Advertising – Industry Terminology
  • Model Formulations
    • Deterministic
    • Stochastic
  • Research Objectives
  • Results and Conclusions
research motivation
Research Motivation
  • Research Stream
research motivation4
Research Motivation
  • Online Advertising Revenue
research motivation5
Research Motivation
  • Real-world issue
    • IAB
    • DoubleClick
industry terminology
Industry Terminology
  • Participants

Users

Publisher

Advertisers

industry terminology7

Advertiser

Advertiser

Publisher

Publisher

User

User

Industry Terminology
  • Pricing Models
    • Impression Based Models
      • CPM (cost per mille)
    • Performance Based Models
      • CPC (Cost per click)
      • CPS (Cost per sale)
      • CPA (Cost per acquisition)
    • Currently 50/50 Split
online ad publishing
Online Ad Publishing
  • Implicit Focus for Performance Models
    • Advertisement Targeting
      • Ideal situation – accurate probability matrix
      • Efforts to maximize inclusion of the advertiser’s target audience
        • Content
        • Geographic
          • Local Advertising
          • Nielsen’s DMA
        • Time of day
        • IR Based Technique
online ad publishing9
Online Ad Publishing
  • No Clearly Dominant Pricing Strategy
    • CPM, CPC, CPS ?????
    • Many market based factors
      • Inflation, unemployment, energy prices, etc.
      • Periods of positive economic growth
        • Performance based models dominate
      • Periods of economic decline
        • Impression based models dominate
online ad publishing11
Online Ad Publishing
  • Over the given planning horizon
    • Which days do we publish ads?
    • Which pricing strategy do we use for the advertisement slots?
targeted vs non targeted slots
Targeted vs Non-targeted Slots
  • Strategic Decision
    • Strategy 1
      • Uses 700 targeted and 300 non-targeted slots
      • Results in 300 CPM, 250 CPC and 450 CPS slots
    • Strategy 2
      • Uses 300 targeted and 700 non-targeted slots
      • Results in 700 CPM, 150 CPC and 150 CPS slots
  • Managerial Requirements
    • 3000 CPM, 1500 CPC & 1500 CPS
talk outline13
Talk Outline
  • Research Motivation
  • Online Advertising – Industry Terminology
  • Model Formulations
    • Deterministic
    • Stochastic
  • Research Objectives
  • Results and Conclusions
research objectives
Research Objectives
  • Determine the expected value of perfect information
  • Determine the value of a stochastic analysis
results and conclusions
Results and Conclusions
  • Stochastic Analysis Improvement
    • 23% improvement over the deterministic solution
    • EVPI
    • VSS
  • In conclusion, although our analysis is based on hypothetical data, we feel that this project successfully demonstrates the potential power of a stochastic analysis when the decision making process involves uncertainty for which we have an estimated probability distribution.
thank you
Thank you!

Any Questions

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