Click-Through Rate Estimation for Rare Events in Online Advertising

In online advertising campaigns, to measure purchase propensity, click-through rate (CTR), defined as a ratio of number of clicks to number of impressions, is one of the most informative metrics used in business activities such as performance evaluation and budget planning. No matter what channel an ad goes through (display ads, sponsored search or contextual advertising), CTR estimation for rare events is essential but challenging, often incurring with huge variance, due to the sparsity in data. In this chapter, to alleviate this sparsity, we develop models and methods to smoothen CTR estimation by taking advantage of the data hierarchy in nature or by clustering and data continuity in time to leverage information from data close to the events of interest. In a contextual advertising system running at Yahoo!, we demonstrate that our methods lead to significantly more accurate estimation of CTRs. INTRODUCTION The Internet revolution has driven a transformation of how people experience information, media and advertising. Web advertising did not even exist twenty years ago, but nowadays it has become a vital component of the modern Internet, where advertisements are delivered from advertisers to users through different channels such as display ads, sponsored search and contextual advertising. Based on a recent study by Interactive Advertising Bureau and PricewaterhouseCoopers International, online advertising revenue in the first half of 2009 reached over 10.9 billion US dollars (IAB & PwC, 2009). Recent trends have also witnessed that larger and larger share of advertisers’ budgets are devoted to the online world, and online advertising spending has greatly outpaced some of the traditional advertising media, such as radio and magazine. There are many pricing models for online advertising. For example, in a pay-per-impression campaign, the advertisers pay for the number of ad exposures. This is a very popular model in display ads. Another example is pay-per-action, where the advertisers pay only if the ad leads to a sale or similar transaction. Both models have their own limitations. The pay-per-impression model does not consider ad performance while the pay-per-action model often has difficulty in tracking user transactions. Therefore, the success and effectiveness of online advertising campaigns is prevalently measured by whether users click on ads. This pricing model is called pay-per-click, where the advertisers pay a certain amount for every click. As a result, the click-through rate (CTR), defined as a ratio of number of clicks to number of impressions of an ad for a query or on a page, is one of the most useful and informative metrics to measure user response in online advertising. The use of CTR in online advertising is everywhere. For many advertising systems, CTR is one important factor to determine what advertisements to be displayed and in what order. In addition, advertisers often plan their budget based on historical CTRs or predicted CTRs. In online advertising, a serving event refers to the showing of an ad in response to a user query, which can be a search query in sponsored search or a Web page in display and contextual advertising. The serving frequency varies for different queries and ads. Some popular ones account for a large fraction of Internet traffic while the overwhelming counterparts are extremely rare events, whose behaviors follow a typical