Randomized Revenue Monotone Mechanisms for Online Advertising (1507.00130v1)

Abstract: Online advertising is the main source of revenue for many Internet firms. A central component of online advertising is the underlying mechanism that selects and prices the winning ads for a given ad slot. In this paper we study designing a mechanism for the Combinatorial Auction with Identical Items (CAII) in which we are interested in selling $k$ identical items to a group of bidders each demanding a certain number of items between $1$ and $k$. CAII generalizes important online advertising scenarios such as image-text and video-pod auctions [GK14]. In image-text auction we want to fill an advertising slot on a publisher's web page with either $k$ text-ads or a single image-ad and in video-pod auction we want to fill an advertising break of $k$ seconds with video-ads of possibly different durations. Our goal is to design truthful mechanisms that satisfy Revenue Monotonicity (RM). RM is a natural constraint which states that the revenue of a mechanism should not decrease if the number of participants increases or if a participant increases her bid. [GK14] showed that no deterministic RM mechanism can attain PoRM of less than $\ln(k)$ for CAII, i.e., no deterministic mechanism can attain more than $\frac{1}{\ln(k)}$ fraction of the maximum social welfare. [GK14] also design a mechanism with PoRM of $O(\ln^2(k))$ for CAII. In this paper, we seek to overcome the impossibility result of [GK14] for deterministic mechanisms by using the power of randomization. We show that by using randomization, one can attain a constant PoRM. In particular, we design a randomized RM mechanism with PoRM of $3$ for CAII.