A new research report was just published online from the Stanford InfoLab! that might worthy of your attention. Here are the details. Note: The report does get a bit technical at some points but I still think it will be interest to many of you.
Title: Truthful Auctions for Pricing Search Keywords (10 pages; PDF)
Authors: Gagan Aggarwal, Ashish Goel, Rajeev Motwani.
We present a truthful auction for pricing advertising slots on a web-page assuming that advertisements for different merchants must be ranked in decreasing order of their (weighted) bids. This captures both the “Overture model” where bidders are ranked in order of the submitted bids, and the “Google model” where bidders are ranked in order of the expected revenue (or utility) that their advertisement generates. Assuming separable click-through rates, we prove revenue-equivalence between our auction and the non-truthful next-price auctions currently in use.
Want to discuss this new research? Check out this thread in the SEW Forums.