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Predictable Bidding Behavior In A Sponsor Search Market

Have you ever owned a Facebook page? Managing a high-profile Facebook page for your business requires more than just constantly posting photos and updates. Tracking the performance of Facebook ads and boosting them regularly has become the number one concern of a lot of online businesses. In the lecture, we learned about how to construct a matching market based on clickthrough rates and revenues per click. However, we should also keep in mind that this model survives on three very important assumptions: 1. advertisers are aware of the clickthrough rates; 2. clickthrough rates only depends on the slots itself; 3. clickthrough rate of one slot is not influenced by ads in the other slots. As simple as it may seem, in reality, these three assumptions substantially shackles the performance of our model, since the content and creativity of ads do significantly influence the clickthrough rates of the slots they are in. Therefore, clickthrough rate is a reference too fickle to be rely upon. So, what are the other indicators of an advertisement’s performance?

In his article “How to Price, How Much to Charge for Your Blog’s Advertising Spots”, John Saddington pointed out that there are as many as 15 factors people would want to consider before they price their ads slots. More specifically, in the article “Why Conversion Tracking For Facebook Ads Is Important”, author Sid Bharath encourages business owner to optimize the return on investments, instead of the more traditional clickthrough rates. He argues that even though clicks and costs are useful metrics, they don’t directly reflects how much profit the ads generate. If people visiting the website are not buying anything or the advertisement is not attracting a pool of potential customers, it doesn’t matter how many times users click the ad and visit the website. This opens an interesting area in constructing our matching market model. In the lecture, we discussed that announcing/bidding true value is always the dominant strategy when VCG procedure is implemented. Now, as we can convert the clicks into actual return on investment, assuming companies still bid truthfully, the value will be proportional to their return on investment of the slot. Since VCG matching maximizes total valuation, we may be able to predict that the company having the highest ROI will be very likely to occupy the slot with the most value.

sources: [Why Conversion Tracking For Facebook Ads Is Important](
[How to Price, How Much to Charge for Your Blog’s Advertising Spots](


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October 2017