Externalities in Keyword Auctions: An Empirical and Theoretical Assessment

It is widely believed that the value of acquiring a slot in a sponsored search list (that comes along with the organic links in a search engine’s result page) highly depends on who else is shown in the other sponsored positions. To capture such externality effects, we consider a model of keyword advertising where bidders participate in a Generalized Second Price (GSP) auction and users perform ordered search (they browse from the top to the bottom of the sponsored list and make their clicking decisions slot by slot). Our contribution is twofold: first, we use impression and click data from Microsoft Live to estimate the ordered search model. With these estimates in hand, we are able to assess how the click-through rate of an ad is affected by the user’s click history and by the other competing links. Further, we compare the clicking predictions of our ordered search model to those of the most widely used model of user behavior: the separable click-through rate model. Second, we s...

• Type: Conference
• Year: 2009
• Where: WINE
• Authors: Renato Gomes, Nicole Immorlica, Evangelos Markakis
• Keywords: Click-through Rates, Complete Information Nash, Economy, Scoring Rule, WINE 2009