GOOGLE ADWORDS

BIDDINGROHIT KUMAR

GOOGLE ADWORDS• Online advertising service• Enables competition among advertisers• Brief advertising rights on google and

their partner web pages• Based on pre-defined keywords• Links to web page content

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TYPE OF AUCTION

Second price auction• Closed bids• Winner pays just enough to beat the competition• Bid price and quality parameters used for evaluation• Winner decided based on ad rank

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SECOND PRICE AUCTION

• Players bid for a good• Sealed bid• Winner decided based on ad rank – considers bid price and quality of the ad content• Highest bidder wins, but pays the second highest bid

Example:Say bids for a product are A=$100, B=$90, C=$ 80, D=$70So here, A wins the bid, but need to pay just $90

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AD RANK CALCULATION

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STRATEGIESIf you were the loser:You can decrease the bid • And lose again and receive nothing

OrYou can increase the bid, where • You still lose and receive nothing• Or win, but end up paying more than valued

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If you were the winner:You increase the bid • Still win and pay the same as before (second highest bid)

OrYou decrease the bid and• Still pay the same second highest bid price • Or lose and get nothing

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CONCEPTS • Asymmetric – payoffs change with players• Incomplete information – players have private information• Weakly dominant strategy – payoff at least as high as any other strategy• Weakly dominated strategy – all other strategies apart from the weakly

dominant one

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STRATEGY-PROOF • Each player playing their weakly dominant strategy by revealing their private

information• Truthful or dominant-strategy-incentive-compatible (DCIS)• Type of incentive compatible: DCIS & BNIC• IC – every participant gets best for himself by acting true to his preferences• Bayesian-nash-incentive-compatibility (BNIC) – if all participants are true then

it is best to be true too• Used in second price auctions, VCG mechanism, majority voting etc

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VCG MECHANISM • Vickrey–clarke–groves mechanism• Socially-optimum solution• Select any outcome from a set of possible outcomes• Selects that outcome that maximizes the sum values of all the participants

(total value)• Applied in auctions, public projects, quickest path etc

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SHORTEST PATH

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Thank You