Abstract

Abstract:
Online service providers generate much of their revenue by monetizinguser attention through online advertising. In this paper, we investigate {em revenue sharing},where the user is rewarded with a portion of the surplus generatedfrom the advertising transaction, in a cost-per-conversion advertisingsystem. While revenue sharing can potentially lead to an increaseduser base, and correspondingly larger revenues in the long-term, weare interested in the effect of cashback in the short-term, inparticular for a single auction.We capture the effect of cashback on the auction's outcome via {emprice-dependent conversion probabilities}, derived from a model ofrational user behavior: this trades off the direct loss inper-conversion revenue against an increase in conversion rate. Weanalyze equilibrium behavior under two natural schemes for specifyingcashback: as a fraction of the search engine's revenue per conversion,and as a fraction of the posted item price. This leads tosome interesting conclusions: first, while there is an equivalencebetween the search engine and the advertiser providing the cashbackspecified as a fraction of search engine profit, thisequivalence no longer holds when cashback is specified as a fractionof item price. Second, cashback can indeed lead to short-termincrease in search engine revenue; however this depends strongly onthe scheme used for implementing cashback {em as a function} of theinput. Specifically, given a particular set of input values (userparameters and advertiser posted prices), one scheme can lead to anincrease in revenue for the search engine, while the others maynot. Thus, an accurate model of the marketplace and the target userpopulation is essential for implementing cashback.


Download:

Rwine.pdf
ACM COPYRIGHT NOTICE. Copyright © 2012 by the Association for Computing Machinery, Inc. Permission to make digital or hard copies of part or all of this work for personal or classroom use is granted without fee provided that copies are not made or distributed for profit or commercial advantage and that copies bear this notice and the full citation on the first page. Copyrights for components of this work owned by others than ACM must be honored. Abstracting with credit is permitted. To copy otherwise, to republish, to post on servers, or to redistribute to lists, requires prior specific permission and/or a fee. Request permissions from Publications Dept., ACM, Inc., fax +1 (212) 869-0481, or permissions@acm.org.