Faculty of Economics and Business Administration Publications Database

Practice Prize Paper - PROSAD: A Bidding Decision Support System for Profit Optimizing Search Engine Advertising

Abou Nabout, Nadia
Volume: 32
Number: 2
Pages: 213 - 220
Month: March-April
ISSN-Print: 0732-2399
Link External Source: Online Version
Year: 2013
Keywords: Decision support system; Optimized bidding; Search engine advertising; Online advertising

This paper reports on a large-scale implementation of marketing science models to solve the bidding problem in search engine advertising. In cooperation with the online marketing agency SoQuero, we developed a fully automated bidding decision support system, PROSAD (PRofit Optimizing Search engine ADvertising; see http://www.prosad.de), and implemented it through the agency''s bid management software. The PROSAD system maximizes an advertiser''s profit per keyword without the need for human intervention. A closed-form solution for the optimized bid and a newly developed “costs-per-profit” heuristic enable advertisers to submit good bids even when there is significant noise in the data. A field experiment demonstrates that PROSAD can increase the return on investment by 21 percentage points and improve the yearly profit potential for SoQuero and its clients by €2.7 million.