Search and Score-based Waterfall Auction Optimization

Abstract: Online advertising is a major source of income for many online companies. One common approach is to sell online advertisements via waterfall auctions, through which a publisher makes sequential price offers to ad networks. The publisher controls the order and prices of the waterfall in an attempt to maximize his revenue. In this work, we propose a methodology to learn a waterfall strategy from historical data by wisely searching in the space of possible waterfalls and selecting the one leading to the highest revenues. The contribution of this work is twofold; First, we propose a novel method to estimate the valuation distribution of each user, with respect to each ad network. Second, we utilize the valuation matrix to score our candidate waterfalls as part of a procedure that iteratively searches in local neighborhoods. Our framework guarantees that the waterfall revenue improves between iterations ultimately converging into a local optimum. Real-world demonstrations are provided to show that the proposed method improves the total revenue of real-world waterfalls, as compared to manual expert optimization. Finally, the code and the data are available here.