Prof. Dr. Bernd Skiera (Goethe University Frankfurt):
“The impact of hard- and soft-Floors in real-time advertising display auctions on publishers' profit”
Thursday, April 28th, 02:00pm - 04:00pm (WiSo Building, Room 410)
In real-time advertising (RTA), publishers sell each ad impression separately and in real-time in sealed-bid second-price auctions. An innovative feature of these auctions are two kinds of floor prices: the hard-floor that acts as a minimum price below which an ad impression is not sold, and the soft-floor that turns the second-price auction into a first-price auction if the advertiser bids below the soft-floor. This paper is the first to analyze how intensively publishers use hard- and soft-floors as well as how they affect advertisers’ bidding behavior and consequently publisher’s profit. We use a conceptual analysis to show that the optimal hard-floor increases publisher’s profit, but a hard-floor that is set slightly too high lowers publisher’s profit. In contrast, the soft-floor cannot harm publisher’s profit, but it only increases publisher’s profit when advertisers do not adjust their bids with regard to floor prices. In an extensive empirical analysis of 8.4 million auctions and a large field experiment that ran for two weeks and covered more than 630,000 auctions we show that advertisers hardly adapt their bids to floor prices, so that publishers can use floor prices to increase their profit.