Monetization in Product and Display Advertising Marketplaces

Abstract

This dissertation considers monetization strategies in the contextof online product and display ad marketplaces.The first chapter considers online marketplace platforms that trade-offtheir fees from advertising with commissions from product sales. Whilefeaturing advertised products can make search less efficient (loweringtransaction commissions), it incentivizes sellers to compete for betterplacements via advertising (increasing advertising fees). We considerthis trade-off by modeling both sides of the platform. On the demandside, we develop a joint model of browsing (impressions), clicking,and purchase. On the supply side, we consider sellers' valuation andadvertising competition under various fee structures (CPM, CPC, CPA)and ranking algorithms.Using buyer, seller, and platform data from an online marketplacewhere advertising dollars affect the order of seller items listed,we explore various product ranking and ad pricing mechanisms. We findthat sorting items below the fifth position by expected sales revenuewhile conducting a CPC auction in the top 5 positions yields the greatestimprovement in profits (181%) because this approach balances thehighest valuations from advertising in the top positions with thetransaction revenues in the lower positions.The second chapter considers how a publisher should set reserve pricesfor real-time bidding (RTB) auctions when selling display advertisingimpressions through ad exchanges. Through a series of field experiments,we show that a reserve price set based on an imputed demand curve(in the absence of constraints) can increase publisher's revenuesby 32%, thereby affirming the importance of reserve price in maximizingpublisher's revenues. Further, we find that advertisers increase theirbids in response to an experimental increase in reserve price andshow this behavior is consistent with the use of a minimum impressionconstraint to ensure advertising reach.Based on this insight, we construct an advertiser bidding model anduse it to infer the overall demand curve for advertising as a functionof reserve prices. Using this constraint-based demand model, we solvethe publisher pricing problem. Incorporating the minimum impressionconstraint into the reserve price setting process yields a 50% increaseover a solution that does not incorporate the constraint and an additionalincrease in profits of 9 percentage points.