IDEAS home Printed from https://ideas.repec.org/a/spr/joptap/v152y2012i1d10.1007_s10957-011-9886-3.html
   My bibliography  Save this article

Optimal Keyword Bids in Search-Based Advertising with Stochastic Advertisement Positions

Author

Listed:
  • Susan Cholette

    (San Francisco State University)

  • Özgür Özlük

    (San Francisco State University)

  • Mahmut Parlar

    (McMaster University)

Abstract

US expenditures on search-based advertising exceeded $12 billion in 2010. Advertisers bid for keywords, where bid price determines ad placement, affecting click-through and conversion rates. Advertisers must select keywords, allocating each a proportion of their fixed daily budget. In this paper, we construct a stochastic model for the selection and allocation process. We provide analytical results for the single-keyword problem and examine the multiple-keyword problem numerically. We investigate trade-offs between keywords given varying levels of risk and return. We show the implications of enforcing a probabilistic budget constraint. Our paper provides a critical analysis of the advertiser’s problem that may guide future research.

Suggested Citation

  • Susan Cholette & Özgür Özlük & Mahmut Parlar, 2012. "Optimal Keyword Bids in Search-Based Advertising with Stochastic Advertisement Positions," Journal of Optimization Theory and Applications, Springer, vol. 152(1), pages 225-244, January.
    • Handle: RePEc:spr:joptap:v:152:y:2012:i:1:d:10.1007_s10957-011-9886-3
    DOI: 10.1007/s10957-011-9886-3
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s10957-011-9886-3
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s10957-011-9886-3?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Donald L. Keefer & William A. Verdini, 1993. "Better Estimation of PERT Activity Time Parameters," Management Science, INFORMS, vol. 39(9), pages 1086-1091, September.
    2. Benjamin Edelman & Michael Ostrovsky & Michael Schwarz, 2007. "Internet Advertising and the Generalized Second-Price Auction: Selling Billions of Dollars Worth of Keywords," American Economic Review, American Economic Association, vol. 97(1), pages 242-259, March.
    3. G. E. Fruchter & W. Dou, 2005. "Optimal Budget Allocation over Time for Keyword Ads in Web Portals," Journal of Optimization Theory and Applications, Springer, vol. 124(1), pages 157-174, January.
    4. Sha Yang & Anindya Ghose, 2010. "Analyzing the Relationship Between Organic and Sponsored Search Advertising: Positive, Negative, or Zero Interdependence?," Marketing Science, INFORMS, vol. 29(4), pages 602-623, 07-08.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Savas Dayanik & Semih O. Sezer, 2023. "Optimal dynamic multi-keyword bidding policy of an advertiser in search-based advertising," Mathematical Methods of Operations Research, Springer;Gesellschaft für Operations Research (GOR);Nederlands Genootschap voor Besliskunde (NGB), vol. 97(1), pages 25-56, February.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Abou Nabout, Nadia & Skiera, Bernd, 2012. "Return on Quality Improvements in Search Engine Marketing," Journal of Interactive Marketing, Elsevier, vol. 26(3), pages 141-154.
    2. Fei Long & Kinshuk Jerath & Miklos Sarvary, 2022. "Designing an Online Retail Marketplace: Leveraging Information from Sponsored Advertising," Marketing Science, INFORMS, vol. 41(1), pages 115-138, January.
    3. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    4. Sha Yang & Shijie Lu & Xianghua Lu, 2014. "Modeling Competition and Its Impact on Paid-Search Advertising," Marketing Science, INFORMS, vol. 33(1), pages 134-153, January.
    5. Bernd Skiera & Nadia Abou Nabout, 2013. "Practice Prize Paper ---PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising," Marketing Science, INFORMS, vol. 32(2), pages 213-220, March.
    6. Shengqi Ye & Goker Aydin & Shanshan Hu, 2015. "Sponsored Search Marketing: Dynamic Pricing and Advertising for an Online Retailer," Management Science, INFORMS, vol. 61(6), pages 1255-1274, June.
    7. Thomas Blake & Chris Nosko & Steven Tadelis, 2015. "Consumer Heterogeneity and Paid Search Effectiveness: A Large‐Scale Field Experiment," Econometrica, Econometric Society, vol. 83, pages 155-174, January.
    8. Vibhanshu Abhishek & Kartik Hosanagar & Peter S. Fader, 2015. "Aggregation Bias in Sponsored Search Data: The Curse and the Cure," Marketing Science, INFORMS, vol. 34(1), pages 59-77, January.
    9. Kinshuk Jerath & Liye Ma & Young-Hoon Park & Kannan Srinivasan, 2011. "A "Position Paradox" in Sponsored Search Auctions," Marketing Science, INFORMS, vol. 30(4), pages 612-627, July.
    10. Burguet, Roberto & Caminal, Ramon & Ellman, Matthew, 2015. "In Google we trust?," International Journal of Industrial Organization, Elsevier, vol. 39(C), pages 44-55.
    11. Przemys?aw Jeziorski & Sridhar Moorthy, 2018. "Advertiser Prominence Effects in Search Advertising," Management Science, INFORMS, vol. 64(3), pages 1365-1383, March.
    12. Xiaomeng Du & Meng Su & Xiaoquan (Michael) Zhang & Xiaona Zheng, 2017. "Bidding for Multiple Keywords in Sponsored Search Advertising: Keyword Categories and Match Types," Information Systems Research, INFORMS, vol. 28(4), pages 711-722, December.
    13. Shijie Lu & Sha Yang, 2017. "Investigating the Spillover Effect of Keyword Market Entry in Sponsored Search Advertising," Marketing Science, INFORMS, vol. 36(6), pages 976-998, November.
    14. Carsten D. Schultz, 2020. "The impact of ad positioning in search engine advertising: a multifaceted decision problem," Electronic Commerce Research, Springer, vol. 20(4), pages 945-968, December.
    15. Anoek Castelein & Dennis Fok & Richard Paap, 2019. "Dynamics in clickthrough and conversion probabilities of paid search advertisements," Tinbergen Institute Discussion Papers 19-056/III, Tinbergen Institute.
    16. Michael R. Baye & Babur De los Santos & Matthijs R. Wildenbeest, 2016. "Search Engine Optimization: What Drives Organic Traffic to Retail Sites?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 6-31, March.
    17. Ashish Agarwal & Kartik Hosanagar & Michael D. Smith, 2015. "Do Organic Results Help or Hurt Sponsored Search Performance?," Information Systems Research, INFORMS, vol. 26(4), pages 695-713, December.
    18. Justin M. Rao & Andrey Simonov, 2019. "Firms’ reactions to public information on business practices: The case of search advertising," Quantitative Marketing and Economics (QME), Springer, vol. 17(2), pages 105-134, June.
    19. Andrey Simonov & Shawndra Hill, 2021. "Competitive Advertising on Brand Search: Traffic Stealing and Click Quality," Marketing Science, INFORMS, vol. 40(5), pages 923-945, September.
    20. Feng Wang & Li Zuo & Zhi Yang & Yueyan Wu, 2019. "Mobile searching versus online searching: differential effects of paid search keywords on direct and indirect sales," Journal of the Academy of Marketing Science, Springer, vol. 47(6), pages 1151-1165, November.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:joptap:v:152:y:2012:i:1:d:10.1007_s10957-011-9886-3. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.