Budget pacing control:

- take the daily budget as input
- calculate the delivery schedule
- based on the schedule, DSP tries to spread the actions throughout the day

Notation:

- $n$ ad requests
- $x_i = \{0, 1\}$, decision whether to bid on $i$ or not
- $v_i$ - value if we win on $i$ and show it to user
- $c_i$ - cost of showing $i$
- $\hat{c}_i$ - how much we are willing to bid
- for second price option, $\hat{c}_i = c_i + \epsilon_i$, and $\epsilon_i$ is unknown to the bidder at bid time

- $B$ total budget, allocated in $T$ slots $b_t$ s.t. $\sum b_t = B$

Goal:

- maximize $\sum v_i x_i$
- s.t. $\sum_j c_j x_j \leqslant b_t$ for all $j$ of $b_t$

Metrics:

- eCPC or eCPA, want to minimize them

More notation:

- let $s(t) = \sum c_j x_j$ - how much we actually spent during $t$
- want $\sum s(t)$ be as close to $B$ as possible
- and $s(t)$ to be close to $b_t$

Assumption:

- $s(t)$ is proportional to the number of impressions served at the time
- it means that the price of individual impressions are approximately the same during this time slot
- the length of the time slot can be chosen s.t. this assumption is not violated

For each ad spot for time $t$ we assign a bid rate (pacing rate):

- $s(t)$ is proportional to number of impressions served
- $\text{requests}(t)$: # of received bid requests
- $\text{bids}(t)$: # of times we decided to bid
- $\text{imps}(t)$: # of shown impressions at $t$
- $\text{bid_rate}(t)$: rate at which we decide to bid on the request
- $\text{bid_rate}(t) = \text{bids}(t) \, / \, \text{requests}(t)$

- $\text{win_rate}(t)$: rate at which we win the bid
- $\text{win_rate}(t) = \text{imps}(t) \, / \, \text{bids}(t)$

- $s(t) \sim \text{request}(t) \cdot \text{bid_rate}(t) \cdot \text{win_rate}(t)$

So we can control $s(t)$ by changing our $\text{bid_rate}(t)$

Changing bid_rate:

Adjusting bid rate for slot $t+1$:

- take feedback from slot $t$
- use this for $t+1$

we can control $\text{bid_rate}(t+1)$

Selecting $b_t$

- uniform - not the best one
- traffic is different during each hour
- should allocate more budget for periods with better quality traffic
- i.e. to the time where the target audience is more active

History-based:

- for each $b_t$ calculate $p_t$
- $p_t$ is probability of success (click or conversion)
- $\sum p_t = 1$

so, ideal spending for the next time slot can be calculated as

$$\left(B - \sum_{m=1}^{t} s(m) \right) \cdot \cfrac{p_{t+1}}{\sum_{m=t+1}^{T} p_m}$$

two parts

- remaining budget: how much money we still have
- how good is the next slot compared to all other remaining slots

note that if $p_t = 0$ for some $t$, the system will never explore this time slots, so should always give it some chance

Once we calculate the desired bid rate, we can

- select top quality ad requests to bid on
- choose the price we are willing to bid for these requests

for each impression $i$ we can choose the price to bid with

construct bidding histogram $c^*$

- this is historical average of costs $c_i$ in $b_t$
- now we know which $b_t$ is cheapest
- take base price and scale it up/down considering bid rate

bid_rate vs bid_price:

- bid_rate controls the frequency of bidding
- but bid price is important
- if it's not high enough, we don't win the impression
- if it's too high, CPA rises

bid price adjustments

- split requests into 3 groups based on bid rate:
- define $\beta_1$, $\beta_2$ s.t. $0 < \beta_1 < \beta_2 < 1$

bid_rate can be in one of these 3 groups:

- safe: $0 < br \leqslant \beta_1$, no delivery issues
- critical: $\beta_1 < br \leqslant \beta_2$, normal delivery
- danger: $\beta_2 < br \leqslant 1$ and cannot win enough impressions

Let $u_i$ be the base bid price however set based on CTR/AR model

- (AR - action rate or conversion rate)

Safe region: learning $\hat{c}_i$

- look at submitted bid price $\hat{c}_i$ and actual price $c_i$
- let $\theta_i = c_i \, / \, \hat{c}_i$
- build a histogram of $\theta_i$, choose $\theta^*$ as the bottom 1-2 percentile
- submit $\hat{c}_i = \theta^* \cdot u_i$

Critical region:

- bid $\hat{c}_i = u_i$

Danger region:

- Reasons for being in this region:
- audience is too specific, not enough bid requests that satisfy all the criteria
- bid price is too low to win impressions
- Can increase the bid price by some coefficient $\rho \geqslant 1$

Why estimate AR?

- to predict the quality of an ad request
- to set the bid price: e.g. AR * CPA goal

Ways to do it:

Ideas:

- use content features for models to estimate CTR/AR
- epsilon-greedy strategy for online bid optimization

Because of unusual unexpected activity spikes we might spend all the budget earlier than expected

solution:

- monitor total spend and stop the campaign when we spend more than B
- monitor spend at $t$ and allow to spend no more than $b_t + \delta$, and pause until $t+1$ if the limit is exceeded

Ad request -> check bid rate -> evaluate CTR/AR -> bid -> ... ... -> SSP -> ... ... -> bid log with win -> save to db db <-> train CTR/AR models <-> compute good bid rate

- Real Time Bid Optimization with Smooth Budget Delivery in Online Advertising: https://arxiv.org/abs/1305.3011