optimizing online advertising 15.071x – the analytics edge...google advertising - adwords • why...
TRANSCRIPT
GOOGLE ADWORDS Optimizing Online Advertising
15071x ndash The Analytics Edge
TM
Google Inc
bull Provides products and servicesrelated to the Internetbull Mission ldquohellip to organize the
worldrsquos information and make ituniversally accessible andusefulrdquo
bull Most widely known for itssearch engine(wwwgooglecom)bull User enters a query Google
returns links to websites thatbest fit query
15071x ndash Google AdWords Linear Optimization Recitation 2
TM
History of Google
bull 1996 ndash Sergei Brin and Larry Page graduate students atStanford working on a research projectbull How to measure importance of any webpage using links on
the internet
bull 1998 ndash Incorporated Google as a company and receivedfirst funding database of 60 million webpages
bull 2004 ndash Initial Public Offering
bull 2007 ndash Google acquires YouTube and other companiesbull 2013 ndash More than 1 billion unique monthly visitors
15071x ndash Google AdWords Linear Optimization Recitation 3
Googlersquos Business Model
bull Google search engine is free to use so how doesGoogle make money
bull Answer online advertising
15071x ndash Google AdWords Linear Optimization Recitation 4
Example of Sponsored Ads
15071x ndash Google AdWords Linear Optimization Recitation
Screen shot copy Google All rights reserved This content is excluded from our Creative Commons license For more information see httpsocwmiteduhelpfaq-fair-use
5
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Google Inc
bull Provides products and servicesrelated to the Internetbull Mission ldquohellip to organize the
worldrsquos information and make ituniversally accessible andusefulrdquo
bull Most widely known for itssearch engine(wwwgooglecom)bull User enters a query Google
returns links to websites thatbest fit query
15071x ndash Google AdWords Linear Optimization Recitation 2
TM
History of Google
bull 1996 ndash Sergei Brin and Larry Page graduate students atStanford working on a research projectbull How to measure importance of any webpage using links on
the internet
bull 1998 ndash Incorporated Google as a company and receivedfirst funding database of 60 million webpages
bull 2004 ndash Initial Public Offering
bull 2007 ndash Google acquires YouTube and other companiesbull 2013 ndash More than 1 billion unique monthly visitors
15071x ndash Google AdWords Linear Optimization Recitation 3
Googlersquos Business Model
bull Google search engine is free to use so how doesGoogle make money
bull Answer online advertising
15071x ndash Google AdWords Linear Optimization Recitation 4
Example of Sponsored Ads
15071x ndash Google AdWords Linear Optimization Recitation
Screen shot copy Google All rights reserved This content is excluded from our Creative Commons license For more information see httpsocwmiteduhelpfaq-fair-use
5
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
History of Google
bull 1996 ndash Sergei Brin and Larry Page graduate students atStanford working on a research projectbull How to measure importance of any webpage using links on
the internet
bull 1998 ndash Incorporated Google as a company and receivedfirst funding database of 60 million webpages
bull 2004 ndash Initial Public Offering
bull 2007 ndash Google acquires YouTube and other companiesbull 2013 ndash More than 1 billion unique monthly visitors
15071x ndash Google AdWords Linear Optimization Recitation 3
Googlersquos Business Model
bull Google search engine is free to use so how doesGoogle make money
bull Answer online advertising
15071x ndash Google AdWords Linear Optimization Recitation 4
Example of Sponsored Ads
15071x ndash Google AdWords Linear Optimization Recitation
Screen shot copy Google All rights reserved This content is excluded from our Creative Commons license For more information see httpsocwmiteduhelpfaq-fair-use
5
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Googlersquos Business Model
bull Google search engine is free to use so how doesGoogle make money
bull Answer online advertising
15071x ndash Google AdWords Linear Optimization Recitation 4
Example of Sponsored Ads
15071x ndash Google AdWords Linear Optimization Recitation
Screen shot copy Google All rights reserved This content is excluded from our Creative Commons license For more information see httpsocwmiteduhelpfaq-fair-use
5
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Example of Sponsored Ads
15071x ndash Google AdWords Linear Optimization Recitation
Screen shot copy Google All rights reserved This content is excluded from our Creative Commons license For more information see httpsocwmiteduhelpfaq-fair-use
5
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Google Advertising - AdWords
bull Why do companies advertise on Googlebull Google receives heavy trafficbull Search pages are formatted in a very clean waybull Companies can choose which types of queries their ads
will be displayed for better targeting
bull 97 of Googlersquos revenues come from AdWords
15071x ndash Google AdWords Linear Optimization Recitation 6
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How does Advertising on Google work
1 Advertisers place bids for different queries in an auction
2 Based on bids and quality score (fit of advertiser and ad to the queries) Google decides price-per-click of each advertiser and each query
3 Google then decides how often to display each ad for each query
15071x ndash Google AdWords Linear Optimization Recitation 7
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Price-per-click (PPC)
bull For each query Google decides each advertiserrsquosprice-per-click (PPC)bull How much advertiser pays Google when user clicks ad
for that query
bull Each advertiser also specifies a budgetbull Each time user clicks on advertiserrsquos ad budget is
depleted by PPC amount
15071x ndash Google AdWords Linear Optimization Recitation 8
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Example of price-per-click
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Budget -T--Mobile-- verizon ATampT $170
T-Mobile $100
Verizon $160
15071x ndash Google AdWords Linear Optimization Recitation
TM
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Click-through Rate (CTR)
bull Advertiser only pays Google if the user clicks on thead
bull The probability that a user clicks on an advertiserrsquos adis the click-through rate (CTR)bull Can also think of as ldquoclicks per userrdquo
15071x ndash Google AdWords Linear Optimization Recitation 10
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Example of click-through rate
Advertiser Query 1 (ldquo4G LTErdquo)
Query 2 (ldquolargest LTErdquo)
Query 3 (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 11
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Average Price Per Display
bull Average amount that an advertiser pays each time itsad is shown is PPC x CTR
15071x ndash Google AdWords Linear Optimization Recitation 12
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
ldquobest LTE networkrdquo ldquobest LTE networkrdquo
Suppose 10 users search for ldquobest LTE networkrdquo
15071x ndash Google AdWords Linear Optimization Recitation 3
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
Google decides to display Verizonrsquos ad
verizon
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
verizon
CTR of Verizon and ldquobest LTE networkrdquo is 02 so only 2 users click on the ad
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
verizon Verizon pays PPC for each user
2 clicksverizon $25 per click
= $50
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
verizon Verizon pays on average per user display
$50verizon
divide 10 displays
= $5 per display
15071x ndash Google AdWords Linear Optimization Recitation
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
How average price per display works
verizon This is exactly the PPC multiplied by the CTR
verizon $25 per click
020 clicks per user
= $5 per userdisplay
15071x ndash Google AdWords Linear Optimization Recitation
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Average price per display for example
Advertiser Query 1 PPC (ldquo4G LTErdquo)
Query 2 PPC (ldquolargest LTErdquo)
Query 3 PPC (ldquobest LTE networkrdquo)
ATampT $5 $5 $20
T-Mobile $10 $5 $20
Verizon $5 $20 $25
Advertiser Query 1 CTR (ldquo4G LTErdquo)
Query 2 CTR (ldquolargest LTErdquo)
Query 3 CTR (ldquobest LTE networkrdquo)
ATampT 010 010 008
T-Mobile 010 015 010
Verizon 010 020 020
15071x ndash Google AdWords Linear Optimization Recitation 19
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Average price per display for example
Advertiser Query 1 APPD (ldquo4G LTErdquo)
Query 2 APPD (ldquolargest LTErdquo)
Query 3 APPD (ldquobest LTE networkrdquo)
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
15071x ndash Google AdWords Linear Optimization Recitation 20
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Query estimates
bull Google does not control how many times a query will be requested ndash driven by users
bull For each query Google has estimate of number of times query will be requested over a given day
15071x ndash Google AdWords Linear Optimization Recitation 21
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Example of query estimates
Query Est of Requests
ldquo4G LTErdquo 140
ldquolargest LTErdquo 80
ldquobest LTE networkrdquo 80
15071x ndash Google AdWords Linear Optimization Recitation 22
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Googlersquos problem
bull How many times to display each ad for each query to maximize revenue
15071x ndash Google AdWords Linear Optimization Recitation 23
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Googlersquos problem
bull Objectivebull Maximize revenue
bull Decisionbull For each advertiser and query number of times ad will
be displayed for that querybull Constraints
bull Average amount paid by each advertiser cannot exceedbudget
bull Total ads for given query cannot exceed estimatednumber of requests for that query
15071x ndash Google AdWords Linear Optimization Recitation 24
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Problem data
Advertiser Avg $ Query 1 Ad Display
Avg $ Query 2 Ad Display
Avg $ Query 3 Ad Display
ATampT $050 $050 $160
T-Mobile $100 $075 $200
Verizon $050 $400 $500
ATampT $170 Q1 (ldquo4G LTErdquo) 140
T-Mobile $100 Q2 (ldquolargest LTErdquo) 80
Verizon $160 Q3 (ldquobest LTE networkrdquo) 80
Advertiser Budget Query Est of Requests
15071x ndash Google AdWords Linear Optimization Recitation 24
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Modeling the problem
bull Decision variables
bull Revenue to Google under ad strategy
bull Amount advertiser ATampT pays in ad strategy
bull Number of times ad strategy uses query 2
15071x ndash Google AdWords Linear Optimization Recitation 25
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Extensions to the problem
bull Slatespositionsbull Personalizationbull Other issues
bull Estimating CTRsbull How should advertisers bid
15071x ndash Google AdWords Linear Optimization Recitation 26
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Slatespositions
bull Search result page has space for more than one adbull Slate combination of adsbull Many possible slates which ones to display
15071x ndash Google AdWords Linear Optimization Recitation 27
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
Personalization
bull In addition to the query Google can use otherinformation to decide which ad to displaybull IP addressgeographic locationbull Previous Google searchesbrowser activity on Google
bull How do we account for this
15071x ndash Google AdWords Linear Optimization Recitation 28
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
AdWords at Googlersquos scale
bull We studied a small instance of the ad allocationproblembull 3 bidders 3 queries
bull We saw how an optimization solution increasesrevenue by 16 over ldquocommon-senserdquo solution
bull In reality problem is much largerbull Hundreds to thousands of bidders over $40 billionbull Gains from optimization at this scale become enormous
15071x ndash Google AdWords Linear Optimization Recitation 29
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms
MIT OpenCourseWare httpsocwmitedu
15071 Analytics Edge Spring 2017
For information about citing these materials or our Terms of Use visit httpsocwmiteduterms