Simple Mechanisms for Welfare Maximization in Rich Advertising Auctions

Gagan Aggarwal, Kshipra Bhawalkar, Aranyak Mehta, Divyarthi Mohan, Alexandros Psomas

Keywords: mechanism design, auctions, social welfare, price of anarchy, knapsack

TL;DR: We introduce the problem of rich ads and give a simple truthful mechanism that achieves a constant of the optimal welfare.

Abstract:

Internet ad auctions have evolved from a few lines of text to richer informational layouts that include images, sitelinks, videos, etc. Ads in these new formats occupy varying amounts of space, and an advertiser can provide multiple formats, only one of which can be shown.
The seller is now faced with a multi-parameter mechanism design problem.
Computing an efficient allocation is computationally intractable, and therefore the standard Vickrey-Clarke-Groves (VCG) auction, while truthful and welfare-optimal, is impractical.

In this paper, we tackle a fundamental problem in the design of modern ad auctions. We adopt a ``Myersonian'' approach and study allocation rules that are monotone both in the bid and set of rich ads. We show that such rules can be paired with a payment function to give a truthful auction. Our main technical challenge is designing a monotone rule that yields a good approximation to the optimal welfare. Monotonicity doesn't hold for standard algorithms, e.g. the incremental bang-per-buck order, that give good approximations to ``knapsack-like'' problems such as ours. In fact, we show that no deterministic monotone rule can approximate the optimal welfare within a factor better than $2$ (while there is a non-monotone FPTAS). Our main result is a new, simple, greedy and monotone allocation rule that guarantees a $3$ approximation. In ad auctions in practice, monotone allocation rules are often paired with the so-called \emph{Generalized Second Price (GSP)} payment rule, which charges the minimum threshold price below which the allocation changes. We prove that, even though our monotone allocation rule paired with GSP is not truthful, its Price of Anarchy (PoA) is bounded. Under standard no-overbidding assumptions, we prove bounds on the a pure and Bayes-Nash PoA. Finally, we experimentally test our algorithms on real-world data.