EXPRESS: Context Information can Increase Revenue in Online Display Advertising Auctions: Evidence from a Policy Change

Ad exchanges where real-time auctions for display ad impressions take place historically emphasized user targeting, and advertisers sometimes did not know which sites their ads would appear on, i.e., the ad context. More recently, some ad exchanges have been encouraging publishers to provide context information to ad buyers, allowing them to adjust their bids for ads at specific sites. This paper explores the empirical effect of a change in context information provided by a private European ad exchange. Analyzing this as a quasi-experiment using difference-in-differences, the authors find that average revenue per impression rose when the exchange provided subdomain information to ad buyers. Thus, ad context information is important to ad buyers, and they will act on it. Revenue per impression rises for nearly all sites, which is what is predicted by auction theory when rational buyers with heterogeneous preferences are given more information. The exception to this are sites with thin markets prior to the policy change; consistent with theory, these sites do not show a rise in prices. This paper adds evidence that ad exchanges with reputable publishers, particularly smaller volume, highquality sites, should provide ad buyers with context information, which can be done at almost no cost.

News Feed Advertising and Positive Attitude: An Interpretation Model Based on Information Processing

This study mainly examines the different effects and mechanisms of news feed advertising (vs. traditional display advertising) on advertising attitude and brand attitude by using an observational experiment that categorized participants based on their past experiences. By analyzing the video advertising of the “Li Ning” brand, three conclusion were drawn. First, compared with traditional display advertising, news feed advertising led to more positive advertising attitude and brand attitude. Second, generation and transmission mechanism of attitudes were applicable to the interpretation rules of the classical information processing process model, which showed that the information processing process of the news feed advertising and the traditional display advertising were consistent. Third, consumer’s brand experience did not affect the direct effects of “attention” on “memory,” but affected the mediate role of “interpretation,” which showed that news feed advertising may have a stronger “drainage” effect when promoting new products and developing new markets. However, if the consumer’s experience is not enhanced, the brand attitude triggered by news feed advertising will still not be stable. These findings are conducive to further understanding the effect of news feed advertising on advertising attitude and brand attitude.

Competition in digital advertising markets

Digital advertising, both display advertising and search advertising, represents a very important part of the overall advertising market in the United Kingdom. Google and Facebook have a high degree of market power in search and display advertising, respectively. On 1 July 2020, the Competition and Markets Authority published its Final Report on its market study into online platforms and digital advertising, in which it looked in some depth at digital advertising markets, assessing whether a lack of transparency, conflicts of interest, and the leveraging of market power undermine competition in digital advertising. This article examines the issues considered by, and the findings of, the CMA in its Market Study and set out in its Final Report, and describes the policy options identified in the Market Study for promoting competition and other policy goals, such as data protection and privacy and ensuring the viability of news publishers, in digital advertising markets.

EXPRESS: First-Price Auctions in Online Display Advertising

We link the rapid and dramatic move from second-price to first-price auction format in the display advertising market to the move from the waterfalling mechanism employed by publishers for soliciting bids in a pre-ordered cascade over exchanges, to an alternate header bidding strategy that broadcasts the request for bid to all exchanges simultaneously. First, we argue that the move by the publishers from waterfalling to header bidding was a revenue improving move for publishers in the old regime when exchanges employed second-price auctions. Given the publisher move to header bidding, we show that exchanges move from second-price to first-price auctions to increase their expected clearing prices. Interestingly, when all exchanges move to first-price auctions, each exchange faces stronger competition from other exchanges and some exchanges may end up with lower revenue than when all exchanges use second-price auctions; yet, all exchanges move to first-price auctions in the unique equilibrium of the game. We show that the new regime hinders the exchanges’ ability to differentiate in equilibrium. Furthermore, it allows the publishers to achieve the revenue of the optimal mechanism despite not having direct access to the advertisers.