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Dynamic Revenue Management For Online Display Advertising

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Executive Summary

In this paper, the authors propose a dynamic optimization model to maximize a web publisher's online display advertising revenues. Specifically, the model dynamically selects which advertising requests to accept and dynamically delivers the promised advertising impressions to viewers so as to maximize revenue, accounting for uncertainty in advertising requests and website traffic. After characterizing the structural properties of the model, they propose a Certainty Equivalent Control heuristic and then show with a real case study that the optimization-based method typically outperforms common practices. The analysis thus highlights the importance of integrating the sales function with the advertisement delivery function in web publishing companies for globally maximizing revenues.

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