ita05 agents presentation
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Kitts, B. Laxminarayan, P. and LeBlanc, B. (2005) Cooperative Strategies for Keyword Auctions, First International Conference on Internet Technologies and Applications, Wales. September 2005. [PPT Presentation]TRANSCRIPT
Search Engine Auctions
Sampath Kongala
Matthew Meir
Ronald Dominici
Jeff Chan
Ryan Meech
Chuck Haggerty
John Tawdros
Sam DerKazaryan
Alison Kuryla
Ben Perry
Brendan Kitts, Benjamin LeBlanc, Paramesh Laxminaravan
iProspect
The Arsenal on The Charles
311 Arsenal Street,
Watertown, MA. USA.Email: [email protected]
PPC
?
Say I want to customers to buy my
“bedsheets”.
Hey, how about - “green bedsheets”!
PPC Auction example
Get keyword if
possible
PPC Auction example
1. Green Bed Sheets up to 70% Off
Shop Smartbargains now and save on high-quality sheets and more. Plus,
you'll also find incredible low prices on everything for the
bath. www.smartbargains.com (Advertiser's Max Bid: $0.12)
2. Green Bed Sheet - Compare Prices
Find, compare and buy home and garden products from online stores at
Nextag. www.nextag.com (Advertiser's Max Bid: $0.11)
3. Buy Green Sheets at Linenplace
Indulge in our fine selection of luxurious merchandise such as 600 thread
count sheets and Egyptian cotton towels. www.linenplace.com (Advertiser's Max Bid: $0.10)
4. Wal-Mart Home
Springmaid antique rose bed-in-a-bag 220-thread count only
$49.84. www.walmart.com (Advertiser's Max Bid: $0.10)
Check the auction…. “Green Bedsheets”
$0.11 would mean I end up
in position 2-3
Dem
an
d
Every click I agree
to pay this price for
each customer
PPC Example
1. Learn about Life Meaning
Based on the wisdom of Kabbalah, Spirituality for Kids programs present
teachings that espouse peace and fulfillment as the birthright of all
humanity. www.kabbalah.com (Advertiser's Max Bid: $0.13)
2. Discover Your Meaning in Life
Explore and discover your life purpose, your unique vision, and the meaning
of your life through intuitive and supportive life coaching. Call today for a free
session. www.possibilitiescoaching.com (Advertiser's Max Bid: $0.12)
3. Find Your Life Purpose Workbook
Become your true self. Find your life purpose. Identify your values, talents
and top motivators. Develop clarity, meaning and personal
power. www.higherawareness.com (Advertiser's Max Bid: $0.12)
4. Discover the Meaning of Your Life
Understanding who you are, why you're here, and what you can do about it.
Manifest changes and find happiness using the powers of thought and
imagination. www.mcssl.com (Advertiser's Max Bid: $0.11)
PPC Example
Hey, just $0.13 per
click!
Hey,
maybe I
should
try this
meaning
of life
stuff…!
$19.95
PPC Example
• Broad phrases that attract millions of customers,
eg. “car” generate a lot of non-converting traffic.
• Every customer who doesn’t convert costs the
advertiser money.
• Accounts evolve under economic pressure to
become more and more finely tuned to their
audience in order to decrease expenses and
increase number of conversions.
Economics of PPC
Result
Auction prices
Does keyword price correspond to anything in the real world?
• home $0.53
• loan $3.75
• home loan $4.78
• home loan ca $7.83
• home loan california $8.09
• home mortgage california $10.14
Auction prices
….
• home loan al $3.23 (Alaska)
• home loan co $3.78 (Colorado)
• home loan ky $3.83 (Kentucky)
• home loan ks $3.93 (Kansas)
• home loan nh $3.99 (New Hampshire)
• home loan mt $4.03 (Montana)
• home loan tx $5.26 (Texas)
• home loan pa $6.11 (Pennsylvania)
• home loan fl $6.99 (Florida)
• home loan ca $7.83 (California)
• home loan ny $9.50 (New York)
Expensive keywords = lucrative customers
What will the most expensive keywords be?
Keyword prices
Most expensive keyword in the
world….
Mesothelioma!
…. Huh?
Most expensive keyword in the
world….
Bialik, C. (2004), “Lawyers Bid up Value of Web-Search Ads”, Wall Street Journal Online. April 8th, 2004, Dow Jones
Newswires.
1. Mesothelioma Lawsuits
Are you a victim of Mesothelioma Asbestos disease? Let Mesothelioma
Asbestos Lawsuits assist you in claiming the compensation loss that you are
entitled. www.mesothelioma-lawsuits-asbestos.com (Advertiser's Max Bid: $100.00)
2. Mesothelioma Hope, Help, Legal Options
Current news on mesothelioma help, treatment, clinical trials and legal
options helping hundreds of mesothelioma victims. Visit us to request free
personal visit and free information packet. www.mesotheliomaoptions.com (Advertiser's Max Bid: $100.00)
3. Mesothelioma Treatment
Information on treatment options, cancer centers, clinical trials, newsletter,
legal rights and other useful links for those who suffer from mesothelioma. Fill
out form for more info. www.mesotheliomaweb.org (Advertiser's Max Bid: $100.00)
4. Mesothelioma Patient Support
Mesothelioma Net, a Web site for mesothelioma patients and their families
that includes treatment options, doctors, medicines and how to obtain
financial assistance and other support. mesothelioma-net.com (Advertiser's Max Bid: $100.00)
5. Mesothelioma Treatment Update
Medical treatment information and legal representation for mesothelioma,
lung cancer, asbestosis and pleural disease victims caused by asbestos
exposure. www.mesothelioma.com (Advertiser's Max Bid: $50.00)
$100 per
click
$50 per
click
Overture auction for:
“Mesothelioma” July 19,
2004
Most expensive keyword in the
world….
Most expensive keyword in the
world….
Most expensive keyword in the
world….
• $100 for a click!?!?
• (Reality check)
• Average Mesothelioma settlement over past 5
years: (US) $1 million. Law firm takes 40% =
$400,000
• Conversion rate => Enter here
Are these guys crazy?
• E[payoff|conv] = $400,000
• Pr(conv|click) = 1/1000, say
• Revenue per click = E[payoff|conv] *
Pr(conv|click) = $400
Ramp up the bids!
Are these guys crazy?
Keyword auctions
In 2000 there were this many
auctions……
There are
now….
Explosion of Paid Search
Paid Search is now the largest advertising vehicle on the internet
Internet Advertising
Expenditure by vehicle
4%
15%
31%
0%
5%
10%
15%
20%
25%
30%
35%
2001 2002 2003
Year
Perc
en
tag
e o
f sp
en
d
Search
Search
Internet Advertising
Expenditure by vehicle
36%
29%
22%
0%
5%
10%
15%
20%
25%
30%
35%
40%
2001 2002 2003
Year
Perc
en
tag
e o
f sp
en
dBanners
Banner ads
Cost Per Acquisition Across Various
Direct Marketing Methods (source: US Bancorp Piper Jaffray Equity Research)
$9.94
$2.00$1.18
$0.50 $0.29
$0.00
$2.00
$4.00
$6.00
$8.00
$10.00
$12.00
Direct
Banner
Ads
Yellow
Pages
Email Search
Engine
Very low CPA
Explosion of Paid Search
Source: Forrester’s Consumer Technographics 2003 North American Benchmark Study; Base: U.S. Households
Online and television mirror the percent of time households spend with each
medium. Ad spend – opportunity to reach prospects – does not.
Online
Magazines
Radio
Newspapers
TV
0% 10% 20% 30 % 40%
Percent of ad
spending on
each media type
Percent of time
households
spend with each
media type
Adv on internet will grow
Explosion of Paid Search
Search auctions are now bigger than
eBay.
Where are the researchers?
2%
7%
21%
27%
6%
27%
0% 10% 20% 30% 40% 50%
Same bid for all
words
Use amount
suggested by engine
No particular method
Bid for top three
listing
Calculate percentage
of cost of good sold
Use historal
effectiveness data
Percentage of Search Marketers
Source: JupiterResearch Executive Survey (8/04), n = 538 (search marketers, US only)
historical
Bidders today are irrational
But Bidding can be turned into
an optimization problem....
Objective: Maximize Profit
Subject To:
Budget, Return on Advertising, Position,
Other constraints
Objective
)),,(,,()),,(,,( ,,, tktk
k t
tkk btkptkcbbtkptkcr
Maximize profit: Find bids that maximize the
sum of profit over all auctions in the planning
horizon.
Profit = RevPerClick * clicks – bid * clicks
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
Budgetbtkptkcbk t
tktk )),,(,,( ,,
Constraints
Budget: “Don’t spend more than $100 per month”
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
ROAS: “For every $1 spent, I must generate
at least $1.50
ROAS
btkptkcr
btkptkcb
k t
tktk
k t
tktk
)),,(,,(
)),,(,,(
,,
,,
)),,(,,( ,tkk btkptkca
)),,(,,()( ,,, tktkktk btkptkcbr
)),,(,,( ,tkk btkptkcr
)),,(,,( ,, tktk btkptkcc
),,( ,, tktk btkpp
Acquisitions
Profit
Revenue
Clicks
Position
Cost)),,(,,( ,,, tktktk btkptkcbC
kr Revenue per click
)),,(,,( ,tkbtkptkc Position-Clicks
),,( ,tkbtkpPrice-Position
Building the Profit FunctionF
un
ctio
ns e
stim
ate
d
sta
tistic
ally
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
Price prediction
Position prediction:
If I offer a bid on keyword “health
insurance” in 5 days time, what position
will I be awarded?
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
Clicks prediction
Clicks prediction:
If I am in position 5 on keyword “health
insurance” 5 days from now, how many
clicks will be attracted to my site?
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
)),,(,,( ,tkk btkptkca
)),,(,,()( ,,, tktkktk btkptkcbr
)),,(,,( ,tkk btkptkcr
)),,(,,( ,, tktk btkptkcc
),,( ,, tktk btkpp
Acquisitions
Profit
Revenue
Clicks
Position
Cost)),,(,,( ,,, tktktk btkptkcbC
Building the Profit Function
Intro to PPC
Rule-based bidding
PPC agent
Case study
Results
What worked
What didn’t
What now?
Profit Function for one auction-
time slice
0 10 20 300
1
2
3
4bid
0 10 20 300
5
10
15
20
25
30
"mailing lists", kid 51, profitable below 18, maxprof 18
clicks
0 10 20 300
0.5
1
1.5
2conv
0 10 20 300
10
20
30
40rev
0 20 40-60
-40
-20
0
20
pos
prof
0 10 20 300
20
40
60
80
100cost
Se
ale
d b
id,
for
on
e
ke
yw
ord
-tim
e
Conversion Rate for Selection of Retailers
(1.0 = average conversion rate)
1.0
0.8
0.6
0.4
0.3 0.3 0.3
0.6
0.8
1.0
1.1 1.1 1.1 1.1
1.2 1.1 1.1 1.11.1
1.1
1.2 1.2 1.21.2
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
12:0
0 A
M
2:0
0 A
M
4:0
0 A
M
6:0
0 A
M
8:0
0 A
M
10:0
0 A
M
12:0
0 P
M
2:0
0 P
M
4:0
0 P
M
6:0
0 P
M
8:0
0 P
M
10:0
0 P
M
Hour
Co
nvers
ion
rate
/
Avera
ge c
on
vers
ion
rate
24 Hour change in consumer
behavior
Conversion rate for selection of retailers
(1.0 = conversion rate on Nov 11, 2004)
0
1
1
011
11
11111
1
1
111
1111111
1111
11121
2222222
3
333333
34
4
44
4
5
5
5
566
656
4
44
32
222
33
2
4
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
10/1
6/0
4
10/2
3/0
4
10/3
0/0
4
11/0
6/0
4
11/1
3/0
4
11/2
0/0
4
11/2
7/0
4
12/0
4/0
4
12/1
1/0
4
12/1
8/0
4
12/2
5/0
4
Date
Lif
t in
Sa
les
pro
ba
bilit
y
2 Month change in consumer
behavior
• Day parting: Decides when and what to spend
• Saves up money to dominate during times of high purchase activity
• RL style exploration
• Model testing and redundancy
• Financial fail-safes
• Emails alerts if critical variables are unusual
• Monitoring system
• Selectable optimization objectives and constraints
• 40 rules
• What-if predictions & recommendations
Why the bidding agent is cool
Account Start Up
User Rules and
Objectives
Model Quality
Current State of
Auction
Conversion History
What-if Analysis
Expanded Keyword
List
Why the bidding agent is cool
Why the bidding agent is cool
Why the bidding agent is cool
Why the bidding agent is cool
Why the bidding agent is cool
Why the bidding agent is cool
What-if Analysis
Account Start Up
User Rules and
Objectives
Model Quality
Current State of
Auction
Conversion History
What-if Analysis
Expanded Keyword
List
Budget Profit Conversions Clicks Expenditure Bid CPA
$20 $49.17 1.93 18.31 $20.00 $0.88 $10.35
$40 $82.32 2.56 26.17 $40.00 $0.98 $15.64
$60 $103.82 2.79 30.47 $60.00 $1.04 $21.54
$80 $102.26 3.07 38.48 $80.00 $1.27 $26.05
$100 $97.06 3.29 44.44 $100.00 $1.33 $30.40
$120 $89.78 3.39 46.06 $120.00 $1.37 $35.38
$140 $81.68 3.56 49.07 $140.00 $1.45 $39.28
Why the bidding agent is cool
Account Start Up
User Rules and
Objectives
Model Quality
Current State of
Auction
Conversion History
What-if Analysis
Expanded Keyword
List
50 100 150 200 250 300
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
budget
lift
Effect of budget on profit, traffic and conversions
profit
conversions
clicks
bid
pos
Why the bidding agent is cool
Account Start Up
User Rules and
Objectives
Model Quality
Current State of
Auction
Conversion History
What-if Analysis
Expanded Keyword
List
20 40
60 80
100120
140160
180200
220240
260280
3001.05271
2.052713.05271
4.052715.05271
6.052717.05271
8.052719.05271
10.052711.0527
12.0527
0
0.2
0.4
0.6
0.8
budget
Positions captured under budget excl minimum bids
position
pro
b p
ositio
n
Why the bidding agent is cool
September 18, 2003, 7pmSeptember 17, 2003, 3pm
Knowledge of different
demand functions allows
for “day part” bidding. Off-
line because heavy
demand at this time
would exhaust the budget
Time-dependent de-activation
The agent even likes gaps!
5 10 15 20 25 30 35 400
1
2
3
4
5
6
7
8
9Last bid positions for mailing list
Position 6
Position
Bid
5 10 15 20 25 30 350
1
2
3
4
5
6
7Last bid positions for business list
Position 10
Position
Bid
Analysis of Bidding Strategy
5 10 15 20 25 30 35 400
1
2
3
4
5
6
7
8
9Last bid positions for business lead
Position 10
Position
Bid
Analysis of Bidding Strategy
Many keywords
that users insisted
on winning are now
still being bid, but
constrained to
lower positions.
1 2 3 4 5 6 7 8 9
0
10
20
30
-70
-60
-50
-40
-30
-20
-10
0
10
hour of day
Actual profit by position-time mailing list
position
pro
fit
Decreased Cost per Click 36%
Decreased Cost per Order 63%
Results
Cost per Click Cost per Order
Self Managed
iSEBA
Increased revenue from PPC 150%
Increased PPC orders 126%
Results
Revenue Orders
Self Managed
iSEBA
4,991% increase in click-throughs
157% Return on Ad Spending
71% Increase in Conversion Rates
“We’re buying the right keywords,
and writing better descriptions to go with those keywords,”
- Karen Weber, Director of E-Commerce for HatWorld
• Autonomous bidding for 2 years – real money, real risks
• In excess of (US) $6 million dollars under management
• Revenue doubled last quarter
• > 100,000 auctions under management
• Too big for humans to manage.
• Search auctions being considered for TAC 2006!
Project Status
Brendan Kitts
P. Laxminarayan
Ben LeBlanc
Erik Westland
S. DerKazaryan
Alison Kuryla
Charles Haggerty
Ryan Meech
Ben Perry
Sam Kongala
Sam Chiu
Thankyou
Enquiries, papers, say hello: [email protected]