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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 l.jpg

Online Advertisement Publishing – Which Pricing Model is the best?

Jason Deane

Stochastic Optimization Project

Professor: Dr. Uraysev

Wednesday, December 7th, 2005


Talk outline l.jpg
Talk Outline the best?

  • Research Motivation

  • Online Advertising – Industry Terminology

  • Model Formulations

    • Deterministic

    • Stochastic

  • Research Objectives

  • Results and Conclusions


Research motivation l.jpg
Research Motivation the best?

  • Research Stream


Research motivation4 l.jpg
Research Motivation the best?

  • Online Advertising Revenue


Research motivation5 l.jpg
Research Motivation the best?

  • Real-world issue

    • IAB

    • DoubleClick


Industry terminology l.jpg
Industry Terminology the best?

  • Participants

Users

Publisher

Advertisers


Industry terminology7 l.jpg

Advertiser the best?

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 l.jpg
Online Ad Publishing the best?

  • 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


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Online Ad Publishing the best?

  • 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



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Online Ad Publishing the best?

  • Over the given planning horizon

    • Which days do we publish ads?

    • Which pricing strategy do we use for the advertisement slots?


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Targeted vs Non-targeted Slots the best?

  • 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 l.jpg
Talk Outline the best?

  • Research Motivation

  • Online Advertising – Industry Terminology

  • Model Formulations

    • Deterministic

    • Stochastic

  • Research Objectives

  • Results and Conclusions




Research objectives l.jpg
Research Objectives the best?

  • Determine the expected value of perfect information

  • Determine the value of a stochastic analysis


Results and conclusions l.jpg
Results and Conclusions the best?

  • 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.


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Thank you! the best?

Any Questions


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