Optimal dynamic multi-keyword bidding policy of an advertiser in search-based advertising

Dayanık, Savaş and Sezer, Semih Onur (2022) Optimal dynamic multi-keyword bidding policy of an advertiser in search-based advertising. Mathematical Methods of Operations Research . ISSN 1432-2994 (Print) 1432-5217 (Online) Published Online First http://dx.doi.org/10.1007/s00186-022-00803-y

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Abstract

Sponsored search advertisement allows advertisers to target their messages to appropriate customer segments at low costs. While search engines are interested in auction mechanisms that boost their revenues, advertisers seek optimal bidding strategies to increase their net sale revenues for multiple keywords under strict daily budget constraints in an environment where keyword query arrivals, competitor bid amounts, and user purchases are random. We focus on the advertiser’s question and formulate her optimal intraday dynamic multi-keyword bidding problem as a continuous-time stochastic optimization problem. We solve the problem, characterize an optimal policy, and bring a numerical algorithm for implementation. We also illustrate our optimal bidding policy and its benefits over heuristic solutions on numerical examples.
Item Type: Article
Subjects: Q Science > QA Mathematics > QA273-280 Probabilities. Mathematical statistics
Q Science > QA Mathematics
Divisions: Faculty of Engineering and Natural Sciences > Academic programs > Industrial Engineering
Faculty of Engineering and Natural Sciences > Basic Sciences > Mathematics
Faculty of Engineering and Natural Sciences
Depositing User: Semih Onur Sezer
Date Deposited: 18 Nov 2022 12:10
Last Modified: 18 Nov 2022 12:10
URI: https://research.sabanciuniv.edu/id/eprint/45045

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