To Bid or Not to Bid? - Keyword Selection in Paid Search Advertising

Abstract

The selection of keywords for bidding is a critical component of paid search advertising. When the number of possible keywords is enormous, it becomes difficult to choose the best keywords for advertising and then subsequently to assess their effect. To this end, we propose an ultrahigh dimensional keyword selection approach that not only reduces the dimension for selections, but also generates the top listed keywords for profits. An empirical analysis using a unique panel dataset from a large online clothes retailer that advertises on the largest search engine in China (i.e., Baidu) is presented to illustrate the usefulness of our approach.