Truthful Auctions for Automated Bidding in Online Advertising

Truthful Auctions for Automated Bidding in Online Advertising

Yidan Xing, Zhilin Zhang, Zhenzhe Zheng, Chuan Yu, Jian Xu, Fan Wu, Guihai Chen

Proceedings of the Thirty-Second International Joint Conference on Artificial Intelligence
Main Track. Pages 2915-2922. https://doi.org/10.24963/ijcai.2023/325

Automated bidding, an emerging intelligent decision-making paradigm powered by machine learning, has become popular in online advertising. Advertisers in automated bidding evaluate the cumulative utilities and have private financial constraints over multiple ad auctions in a long-term period. Based on these distinct features, we consider a new ad auction model for automated bidding: the values of advertisers are public while the financial constraints, such as budget and return on investment (ROI) rate, are private types. We derive the truthfulness conditions with respect to private constraints for this multi-dimensional setting, and demonstrate any feasible allocation rule could be equivalently reduced to a series of non-decreasing functions on budget. However, the resulted allocation mapped from these non-decreasing functions generally follows an irregular shape, making it difficult to obtain a closed-form expression for the auction objective. To overcome this design difficulty, we propose a family of truthful automated bidding auction with personalized rank scores, similar to the Generalized Second-Price (GSP) auction. The intuition behind our design is to leverage personalized rank scores as the criteria to allocate items, and compute a critical ROI to transforms the constraints on budget to the same dimension as ROI. The experimental results demonstrate that the proposed auction mechanism outperforms the widely used ad auctions, such as first-price auction and second-price auction, in various automated bidding environments.
Keywords:
Game Theory and Economic Paradigms: GTEP: Mechanism design
Game Theory and Economic Paradigms: GTEP: Auctions and market-based systems