Optimizing direct response in Internet display advertising

Abstract

Internet display advertising has grown into a multi-billion dollar a year global industry and direct response campaigns account for about three-quarters of all Internet display advertising. In such campaigns, advertisers reach out to a target audience via some form of a visual advertisement (hereinafter also called “ad”) to maximize short-term sales revenue. In this study, we formulate an advertiser’s revenue maximization problem in direct response Internet display advertisement campaigns as a mixed integer program via piecewise linear approximation of the revenue function. A novelty of our approach is that ad location and content issues are explicitly incorporated in the optimization model. Computational experiments on a large-scale actual campaign indicate that adopting the optimal media schedule can significantly increase advertising revenues without any budget changes, and reasonably sized instances of the problem can be solved within short execution times.