VCG Procedure and Facebook
In class we have been talking about the VCG procedure and how it can be used by companies to figure out which ad slots should go to which companies. The example company we have been using in class thus far is Google. However, Google is not the only company which uses this algorithm to figure out which ads should go in which spot. Facebook has also been using this algorithm for many years now and has made billions of dollars thanks to this procedure. The man who decided to use this procedure for Facebook was a Sandford graduate named John Hegeman.
Of course the VCG procedure used by Facebook is not exactly the same as the VCG procedure we have all been using for our homework. Their algorithm also calculates the relevance of an ad slot compared to other things on your Facebook page. Essentially it’s not just the ads competing for space but news articles and posts that the Facebook algorithm thinks you would enjoy. This makes it different from how we have learned VCG procedure. While technically this procedure does not necessarily generate Facebook the highest amount of income in the short term, in the long term it makes the ads better therefore making more companies want to buy their ad space.
https://www.wired.com/2015/09/facebook-doesnt-make-much-money-couldon-purpose/