Algorithmic Methods for Sponsored Search Advertising

Modern commercial Internet search engines display advertisements along side the search results in response to user queries. Such sponsored search relies on market mechanisms to elicit prices for these advertisements, making use of an auction among advertisers who bid in order to have their ads shown for specific keywords. We present an overview of the current systems for such auctions and also describe the underlying game-theoretic aspects. The game involves three parties— advertisers, the search engine, and search users—and we present example research directions that emphasize the role of each. The algorithms for bidding and pricing in these games use techniques from three mathematical areas: mechanism design, optimization, and statistical estimation. Finally, we present some challenges in sponsored search advertising.