An Effectiveness Analysis of Value-Based Mechanism in the Internet Advertisement Auction

Many companies promote their products by using advertisements for increasing their incomes. Traditionally, advertisements have been placed on some paper madia such as newspapers and magazines. However, there are many advertisements on the Internet searching services sites such as Google, Yahoo! and MSN. Each searching site gains their incomes in the Internet advertisements. The Internet advertisement has more effectiveness and readiness than the paper media. Thus advertisers try to place their advertisements on the searching sites. A structure of the Internet advertisement is that the service providers decide order of placement of many advertisements and advertising fees by auctions when advertisers offer their promotions. It is known that Generalized Second Price Auction (GSP) mechanism is most efficient auction mechanism of the advertisement auction. Some searching sites employ GSP mechanism basically. There are a lot of researches on GSP in order to analyze and clarify its feature and advantages. However, these researches assume that traded advertisements are mutually independent. That is means that each advertisement does not influence other advertisements. Also these researches do not consider a value of advertisement, which means some criterions of a name value of a company, an effectiveness and an importance, that is dependently each other. Each advertisement has some values aside from advertising fee, since searching users click the advertisement when it may be useful and valuable for them. To choose an advertisement for users is based on the value of advertisements. This paper proposes a new advertisement auction mechanism based on GSP with considering the value of advertisement. We analyze the auctioneer´s profit in comparison between normal GSP, normal VCG (Vickrey-Clarke-Groves Mechanism) and our proposed mechanism. The contribution of our research includes to clarify the features and advantages of advertisement auctions and effects to search service si- - tes´ profit rate.