Dynamic Floor Price Calculation for Real-Time Bidding Auctions
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Solution Overview
Problem
Current online advertising auction systems face challenges in optimizing floor prices, leading to inefficient revenue maximization for impression sellers and confusion for buyers due to complex yield management rules and unsophisticated floor pricing logic, which can result in reduced delivery and revenue for buyers.
Innovation Solution
A computer-implemented method for optimizing floor prices in real-time bidding auctions by determining the value of impression consumers based on recent bids, attributes such as time, geography, and consumer behavior, and calculating a maximum floor price that maximizes revenue using a second price auction function, allowing for real-time adjustments and consideration of various auction attributes.
Engineering Contradictions & Design Principles
Engineering Contradiction Analysis
1Productivity
If complex yield management rules and unsophisticated floor pricing logic are used, then revenue maximization capability is improved, but system complexity and ease of operation deteriorate
Solution Approach 1:
The patent transforms complex yield management rules into simple parameter-based floor pricing logic. By changing the approach from rule-based complex systems to parameter-driven simple logic (using only impression value, bidder value, and auction position), the system achieves revenue maximization while dramatically reducing complexity and improving ease of operation.
Solution Approach 2:
The patent extracts the essential elements needed for floor pricing (impression value, bidder value, auction position) from the complex web of yield management rules. By taking out only the critical parameters and ignoring unnecessary complexity, the system maintains revenue optimization capability while simplifying the overall structure.
2Ease of operation
If uniform auction logic is applied, then ease of operation is improved, but adaptability to different buyers and sellers deteriorates
Solution Approach 1:
The patent applies local quality by making the floor price adaptive to specific local conditions (individual impression value, specific bidder value, particular auction position) rather than using a uniform global rule. Each auction gets a customized floor price based on its unique characteristics, achieving both simplicity and adaptability simultaneously.
Solution Approach 2:
The patent introduces dynamics by making floor prices flexible and adaptive rather than static and uniform. The floor price dynamically adjusts based on real-time parameters (impression value, bidder value, auction position), allowing the simple auction logic to adapt to different buyers and sellers effectively.
3Productivity
If second price auctions with revenue-maximizing hard floors are used, then seller revenue is improved, but buyer delivery and satisfaction deteriorate
Solution Approach 1:
The patent applies partial action by implementing floor pricing only when necessary (when it benefits the seller) rather than universally. By selectively applying hard floors based on specific conditions (auction position, bidder value relative to impression value), the system maximizes seller revenue while minimizing negative impact on buyer delivery and satisfaction.
Solution Approach 2:
The patent changes the floor pricing parameter from a fixed revenue-maximizing hard floor to a dynamic floor that considers buyer impact. By adjusting the floor price based on multiple parameters including auction position and bidder value, the system optimizes seller revenue while maintaining buyer satisfaction and delivery levels.
Data Source
AI summary
Systems and methods for optimizing floor prices in real-time bidding auctions are described. Upon receiving a request for an advertisement to be served to an impression consumer, the value of the consumer can be determined based, for example, on historical bid prices in prior auctions. A maximum floor price for the current auction to serve the impression us calculated based at least in part on the value of the impression consumer and one or more attributes associated with the auction. The auction is held using the calculated floor price, which can be adjusted based on an aggressiveness factor, and the winner of the auction can be determined based on the floor price.