Auction Mechanism for Mixed Ads

Sofia Ceppi ( Microsoft Research Cambridge )

The sponsored search auction currently used by search engines to decide which ads to display and how much charge advertisers is a variation of the Generalized Second Price (GSP) auction. Recent studies show that this type of auction is no longer suitable because of the rich space of ads types (e.g., images, rich media) and their combinations that are nowadays available. Truthful auctions are not affected by problems that make the GSP auction not appropriate anymore, and, thus, search engines should be motivated to use them. However, suddenly changing the auction used, moving from the GSP to a truthful one, can entail a significant loss in revenue for the search engine.

In the talk, I will describe a hybrid auction mechanism to use during the transition from the GSP auction to a truthful one that overcomes the problem of the loss in revenue of the search engine. With this mechanism bidders can be truthful or not and are accordingly treated differently. In particular, the class of hybrid mechanisms gives incentives for non-truthful bidders to bid truthfully, while behaving as a non-truthful auction if no bidder is truthful.