Sponsored search engines in competition: advertisers behavior and engines optimal ranking strategies

Patrick Maillé (1) , Bruno Tuffin (2)

1 RSM - Département Réseaux, Sécurité et Multimédia
2 DIONYSOS - Dependability Interoperability and perfOrmance aNalYsiS Of networkS

Search engines are essential actors for web browsing. We analyze here the economic competition between search engines earning money from adword auctions. We develop a twolevel game where at the largest time scale search engines decide which allocation rule to implement, between revenue-based and bid-based; and at the lowest time-scale advertisers decide how to split their advertising budget between the two search engines, depending on the benefits this will bring to them. The game at the largest time scale is solved using backward induction, the search engines anticipating the reactions of advertisers. We describe the advertisers best strategies and show how to determine, depending on parameters, an equilibrium on the ranking rule strategy for search engines; this may explain Yahoo!'s move to switch from bid-based to revenue-based ranking to follow Google's strategy.

Mots clés: Adword auctions; Competition; Advertising; Analytical models; Equations; Games; Search engines

Domaines: Réseaux et télécommunications [cs.NI]

Patrick Maillé, Bruno Tuffin. Sponsored search engines in competition: advertisers behavior and engines optimal ranking strategies. 19th IEEE International Symposium on Modelling, Analysis and Simulation of Computer and Telecommunication Systems (MASCOTS 2011), Jul 2011, Singapore, Singapore. pp.96-103, ⟨10.1109/MASCOTS.2011.19⟩. ⟨hal-00640709⟩