Truthful Auctions for Pricing Search Keywords

Abstract

We present a truthful auction for pricing advertising slots on a web-page assuming that advertisements for different merchants must be ranked in decreasing order of their (weighted) bids. This captures both the ``Overture model'' where bidders are ranked in order of the submitted bids, and the ``Google model'' where bidders are ranked in order of the expected revenue (or utility) that their advertisement generates. Assuming separable click-through rates, we prove revenue-equivalence between our auction and the non-truthful next-price auctions currently in use.