Revenue Management On Sponsored Search Advertising

This thesis focuses on the ranking, pricing and revenue generating rules of Sponsored Search Advertising. In contrast to existing literature, which consider the auction design literature and study the impact of various factors on the efficiency and optimality of an auction including the bidding rule, winner determination and prices winners pay, however ignore the perishability of advertising capacity; this thesis would investigate the advertising ranking rules and eligibility rules in detail, and found that: first, the perishability of the ads positions should be considered, and second, use the maximum bids as one threshold in controlling the eligibility might not be appropriate; if considering the opportunity loss and cost of the sponsored search advertising, lower reserve level should be provided; then using the quality score threshold and the pricing threshold policy would not be appropriate for the top position ads.The first chapter considers the general introduction of Internet ads and introduces the specific status of sponsored search advertising. Current environment of internet ads both in China and abroad were also introduced then the issue of sponsored search advertising was introduced in detail. And current researches on sponsored search advertising are studied and listed in this part. The primary issues this thesis would study and their key points are also given in this chapter.The second chapter considers the literature review of the pricing theory of revenue management. Firstly, primary and basic pricing models of revenue management are introduced; and second, focuses on the pricing theory of auction, and different kinds of auction mechanisms.The third chapter gives a revenue management model for sponsored search adverting, specifically focuses on the AdWords ads displayed on the right side of Google's first result page. And then, briefly compare the revenue management model which considers the perishability of the positions with the conventional models. Then opportunity loss and lower threshold cost was taken into consideration, another revenue management model of the optimal reserve level was constituted and numerical experiment was designed to test the optimal reserve level.Then the fourth chapter considers the issue of AdWords ads displayed at the top position above the result page of Google, and focuses on proving that using the revenue threshold in controlling the eligibility of the top positions is better than the current used pricing threshold and quality score threshold policy. And the numerical experiments of the top position ads were set to prove the theorems of this chapter.The last chapter gives the conclusion of the thesis. Sponsored search advertising positions are perishable goods; the seller should fill up as many positions as possible, an artery reserved revenue and threshold of quality score imposed by sellers are not optimal. When opportunity cost and lower threshold cost were taking into consideration, lower optimal reserve level other than kth should be used. And, for the top position ads, using revenue threshold to control the eligibility performs better than the pricing threshold and quality score threshold policy.