Digital Commerce and the Digitally Connected Enterprise

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Paper Type

Complete

Paper Number

2545

Description

The online display advertising market is undergoing major transformations. In this paper, we study the drivers for publishers’ transition from the waterfall model to header bidding and the ad exchanges’ shift from the second-price to the first-price auction through analytical modeling. We show that adopting header bidding is profitable only when advertisers’ valuations are asymmetric. We also show that switching to the first-price sealed bid mechanism is a dominant strategy for Ad Exchanges when publishers adopt header bidding. Our paper contributes to the literature by reconciling different views around the underlying drivers behind the on-going mechanism switches and shedding new lights on the complex interplay of informational and strategic factors in the online display advertising market.

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Dec 14th, 12:00 AM

Off With Their Headers: Mechanism Choices in Online Display Advertising

The online display advertising market is undergoing major transformations. In this paper, we study the drivers for publishers’ transition from the waterfall model to header bidding and the ad exchanges’ shift from the second-price to the first-price auction through analytical modeling. We show that adopting header bidding is profitable only when advertisers’ valuations are asymmetric. We also show that switching to the first-price sealed bid mechanism is a dominant strategy for Ad Exchanges when publishers adopt header bidding. Our paper contributes to the literature by reconciling different views around the underlying drivers behind the on-going mechanism switches and shedding new lights on the complex interplay of informational and strategic factors in the online display advertising market.

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