Pricing Grows the Pie
Abstract: Some publisher advertising networks provide features
intended to help advertisers bid more efficiently with a single bid in many publishers’
click auctions at once – Smart Pricing on the Google Display Network is one example.
Typically such features involve discounting advertiser bids or prices for clicks on
publisher websites according to how click values vary across sites (for some
appropriate measure of advertiser value). Contrary to concerns that such features
necessarily result in reduced publisher (and network) revenue we find that, in many
simple cases, the modified auction dynamics produce rational incentives for advertisers
to bid more – and spend more – than they would without the benefit of these features.
So if advertisers act in their own interest then publishers and networks stand to make
more revenue as well.