Google's Thriving Advertising Model Has Math Roots

May 23, 2005

Computer Scientists Optimize Online Ad Auction

A 30-second prime-time television spot was once considered to be the most effective form of advertising, but search engine ads are replacing it. This year, predicts Advertising Age, the combined advertising revenues of Google and Yahoo! will rival the combined prime-time ad revenues of America’s three big television networks, ABC, CBS and NBC. Now, researchers at the Georgia Institute of Technology and the University of California, Berkeley have discovered a computer algorithm that could further increase profits for search engine advertising.

“Our algorithm balances two trade-offs in a way that optimizes revenue in Google’s advertising model,” says Vijay Vazirani, professor in the College of Computing at Georgia Tech.

When Internet users perform a search on Google or Yahoo!, a separate list of advertising links appears to the right of each page of search results. Advertisers place bids for their ad links to appear with certain keywords, and the ads are ranked roughly in order of the amounts of the bids. (Search engines also take into account the popularity of the ad or “clickthrough rate.”) An advertiser pays only when someone chooses to click on the ad link. On Google, advertisers can also specify a maximum daily budget for their ads. Once the budgeted amount is spent, an ad is dropped for the rest of the day.

Upon examining the Google ad model, Vijay Vazirani, together with his two Georgia Tech Ph.D. students, Aranyak Mehta and Amin Saberi, and Umesh Vazirani, a professor of computer science at Berkeley, realized that always giving the top spot to the highest bidder is not the best strategy for Google. The top bidders might rapidly exhaust their budgets and get dropped from the auction, thus reducing the competition for that keyword.

Google’s profits will be higher, the researchers reasoned, if it somehow weighs both bids and remaining budget when ranking ads. They found a mathematical formula that finds the optimal trade-off between bids and remaining budget, maximizing what the advertisers are spending.

The research team has filed a provisional patent for their work to ensure that the research remains in the public domain. The team continues to explore other applications for their algorithm such as in engineering and for solving other computer science problems.

Source: Georgia Institute of Technology

Explore further: Real stereotypes continue to exist in virtual worlds

Related Stories

After years of talk, a regulator is willing to take on Google

Apr 30, 2015

The European Commission's decision to charge Google with abuse of its dominant market position in the search business in order to favour its own services has been criticised as too narrow in focus, too superficial for not dealing with the bigger problem of digital competition, ill-conceived for messing with ...

Yahoo unveils new online video series

Apr 28, 2015

US Internet giant Yahoo said it was expanding its online offerings, unveiling 18 new video series with which it hopes to attract a larger audience and advertisers.

Google search mobile switch a revolution for some

Apr 24, 2015

Google's latest Internet revolution this week saw the web giant modify its search algorithm to favour mobile-friendly sites, in a bid to upstage Apple that US media branded a "mobilegeddon".

Google's 1Q reassures investors despite earnings miss

Apr 23, 2015

Google is still flexing its moneymaking muscle even as a technological upheaval nibbles at its dominance in Internet search and European antitrust regulators question some of the company's practices.

Microsoft, Yahoo update search agreement

Apr 16, 2015

Microsoft and Yahoo have updated their search partnership to allow more flexibility in searches and end Yahoo's exclusive sales force role with advertisers.

Recommended for you

Early bird winds back the avian clock

4 hours ago

Modern birds may have evolved six million years earlier than thought, said Chinese palaeontologists Wednesday after analyzing the fossil remains of a previously unknown prehistoric relative.

America's best teachers get creative

7 hours ago

While U.S. educational policy emphasizes high-stakes testing and scripted lessons, the best teachers in the business are taking creative risks—often drawing from their own interests and hobbies—to help ...

User comments : 0

Please sign in to add a comment. Registration is free, and takes less than a minute. Read more

Click here to reset your password.
Sign in to get notified via email when new comments are made.