Hybrid Advertising Auctions

Yi Zhu, Kenneth C. Wilbur
Marketing Science

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excerpt CPM ad pricing has traditionally been associated with brand advertisers. CPM pricing has been the standard ad price metric in traditional advertising media (e.g., television, newspapers, billboards) for decades. These media were typically dominated by brand advertisers, leading to the association. CPM pricing continues to be standard in online display advertising (Evans 2008). CPC pricing, by contrast, is relatively new. It was invented by GoTo .com in 1998 in a successful effort to lure advertisers from rival websites. Google used CPM pricing before adopting the quality-weighted CPC model in 2002 to prevent advertisers from purchasing prominent search ad positions with low-click ads (Battelle 2005).5 Early search advertising was dominated by direct response advertisers. Because these advertisers can usually track consumer profitability at a fine level of granularity, CPC pricing allows them to compare their marginal profits and advertising cost at the level of the individual click. Direct response advertisers prefer CPC pricing and tend to be associated with its use. 263 on 6/8/2019, 1:47:51 PM


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