Advertisement Slot Allocation via Softened Demand Curves
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Solution Overview
Problem
Existing online advertising systems face inequities and inefficiencies in allocating advertisement slots due to budget limitations and auction mechanisms, leading to advertisers paying significantly different prices for the same slots and affecting demand and revenue.
Innovation Solution
A system that normalizes bids based on actual or estimated performance, generates softened demand curves, and allocates slots at a common price to ensure equitable allocation and maximize revenue by identifying a common price where cumulative supply meets cumulative demand.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If advertisement slots are allocated using spot market auctions with bidder budgets, then allocation speed and simplicity are improved, but pricing equity and revenue optimization deteriorate
Solution Approach 1:
The patent introduces a demand curve as an intermediary mechanism between bidders and advertisement slots. Instead of direct auction pricing, the system uses demand curves to translate bidder preferences into equitable pricing. The demand curve aggregates individual bidder demands and determines prices based on cumulative demand, ensuring that bidders with similar valuations pay similar prices regardless of budget constraints or auction timing.
Solution Approach 2:
The system changes the pricing parameter from auction-based variable pricing to demand-curve-based pricing. By using demand curves that map prices to cumulative demand quantities, the system transforms the pricing mechanism to achieve equity. The demand curve parameters are derived from bidder maximum bids and budgets, allowing the system to determine equitable prices that reflect true valuation rather than auction dynamics.
2Adaptability or versatility
If advertisement slots are allocated using spot market auctions, then allocation flexibility is improved, but revenue optimization and demand accuracy deteriorate
Solution Approach 1:
The patent requires bidders to submit demand curves in advance, which capture their valuation and budget information before the actual allocation. This preliminary action allows the system to aggregate demand information across all bidders and determine optimal prices before slots are allocated. The demand curves serve as pre-computed valuation functions that guide the allocation process, ensuring both flexibility and accuracy.
Solution Approach 2:
The system uses demand curves as a feedback mechanism to optimize revenue. By aggregating demand information from all bidders and identifying the price point where cumulative demand equals available supply, the system determines optimal prices that maximize revenue. The demand curve feedback loop allows the system to adjust prices based on overall market conditions rather than individual auction outcomes.
Data Source
AI summary
An allocation subsystem allocates advertisement slots based on cumulative demand of the advertisement slots. The cumulative demand can be based on a softened demand curve for advertisers that have submitted bids for allocation of the advertisement slot. The demand curves can be adjusted to regulate a variance of the advertisers spend rate throughout a budget period.