Budget Planning for Coupled Campaigns in Sponsored Search Auctions

Yanwu Yang, Rui Qin, Bernard J. Jansen, Jie Zhang, and Daniel Zeng
International Journal of Electronic Commerce,
Volume 18, Number 3, Spring 2014, pp. 39-66.

Abstract:  Budget-related decisions in sponsored search auctions are recognized as a structured decision problem rather than a simple constraint. Budget planning over several coupled campaigns (e.g., substitution and complementarity) remains a challenging but important task for advertisers. In this paper, we propose a dynamic multicampaign budget planning approach using optimal control techniques, with consideration of the substitution relationship between advertising campaigns. A three-dimensional measure of substitution relationships between campaigns is presented, namely, the overlapping degree in terms of campaign contents, promotional periods, and target regions. We also study some desirable properties and possible solutions to our budget model. Computational simulations and experiments are conducted to evaluate our model using real-world data from practical campaigns in sponsored search auctions. Experimental results show that (1) our approach outperforms the baseline strategy that is commonly used in practice; (2) coupled campaigns with a higher overlapping degree in between reduce the optimal total budget level, then reduce the optimal payoff, and reach the budgeting cap earlier than those with a less overlapping degree; and (3) the advertising effort can be seriously weakened by ignoring the degree of overlapping between campaigns.

Key Words and Phrases:  Advertising campaigns, budget planning decision analysis, online advertising, operations research in marketing, optimal control, sponsored search, sponsored search auctions.