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What’s the Difference in the Ad Auctioning System of Google vs Facebook?

In general, Google is using the GSP auction and Facebook is using the VCG auction, two different auction formats we have learnt in class. What’s the Difference between these two ad auctioning systems? And why Google and Facebook choose them respectively? The topic is discussed on Quora, where we can see some possible answers posted.

First, let’s discuss Google and its GSP auction. As searching engine, Google’s goal is to help you find information you want as fast as possible and leave Google. Making it easier to find answers, Google really needs efficiency for its huge system. In GSP auction, the procedure for matching is just to assign the best ad slots the highest bidders, which means computing the winners and the prices is a quick step. While in VCG auction, as we learnt in class, it charges each bidder the ‘harm’ he/she causes to others from winning the item. This actually requires calculating the equilibrium with multiple bidders, which can be computationally time-consuming with many bids, many bidders and many slots. That’s certainly not a good choice for high efficiency.

Then, let’s discuss Facebook and its VCG auction. Since Face book is not a searching engine but a social media for people to enjoy, ads are placed different with Googles. Rather than appearing either at the top or on the side of the page, ads are displayed among everything else, like News Feed. Instead of displaying ads based on search terms like Google, Facebook displays ads relating to the other posts within a user’s News Feed. The VCG auction well suited to circumstances where multiple bidders are bidding for multiple items. In class we learnt that bidding truthfully is the dominate strategy during VCG procedure. This strategy can encourage advertisers to properly bid their true value rather than trying to maximize their own revenues. If advertisers know it is impossible to game the system, they will focus on advertising better. It benefits both advertisers and Facebook. Plus, as mentioned above, VCG prices are the ‘harm’ bidders do to others. Interestingly, the ‘harm’ done to Facebook users can also be calculated by the system. Users can mark ads as ‘disliked’, telling Facebook that the ad here is doing harm to them and suggesting Facebook to remove it next time. In this way, Facebook hopes to minimize the harm done to the users and let its users to enjoy with their social media application software.




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