Fraud-sensitive auction mechanism for sponsored search advertising

Linjing Li, Daniel Zeng, Huimin Zhao

Research output: Contribution to conferencePaper

Abstract

Generalized second-price (GSP) is currently the dominant auction mechanism used in the sponsored search advertising market. However, despite its tremendous commercial success and theoretical optimality, its effectiveness is jeopardized by the severe click frauds conducted by advertisers and third-party publishers and the vicious bidding strategy used by advertisers to exhaust the budget of rivals. In this paper, we analyze the drawbacks of GSP that tolerate or even encourage such negative behaviors (i.e., click fraud and vicious bidding) and propose a dynamic modification of the original GSP mechanism to address these drawbacks. Our modified auction mechanism incorporates budget into slot allocation and payment determination and relates the quality score of an advertisement to the current bid. Our analysis shows that our mechanism can effectively reduce the effects of click fraud and vicious bidding.

Original languageEnglish (US)
Pages181-186
Number of pages6
StatePublished - Jan 1 2011
Event21st Workshop on Information Technologies and Systems, WITS 2011 - Shanghai, China
Duration: Dec 3 2011Dec 4 2011

Other

Other21st Workshop on Information Technologies and Systems, WITS 2011
CountryChina
CityShanghai
Period12/3/1112/4/11

Keywords

  • Fraud
  • GSP
  • Mechanism design
  • Sponsored search advertising
  • Vicious bidding

ASJC Scopus subject areas

  • Information Systems

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  • Cite this

    Li, L., Zeng, D., & Zhao, H. (2011). Fraud-sensitive auction mechanism for sponsored search advertising. 181-186. Paper presented at 21st Workshop on Information Technologies and Systems, WITS 2011, Shanghai, China.