Beyond the last touch: Attribution in online advertising

Advertisers who run online advertising campaigns often utilize multiple publishers concurrently to deliver ads. In these campaigns advertisers predominantly compensate publishers based on effort (CPM) or performance (CPA) and a process known as Last-Touch attribution. Using an analytical model of an online campaign we show that CPA schemes cause moral-hazard while existence of a baseline conversion rate by consumers may create adverse selection. The analysis identies two strategies publishers may use in equilibrium { free-riding on other publishers and exploitation of the baseline conversion rate of consumers. Our results show that when no attribution is being used CPM compensation is more benecial to the advertiser than CPA payment as a result of free-riding on other's efforts. When an attribution process is added to the campaign, it creates a contest between the publishers and as a result has potential to improve the advertiser's prots when no baseline exists. Specically, we show that last-touch attribution can be benecial for CPA campaigns when the process is not too accurate or when advertising exhibits concavity in its effects on consumers. When baseline effects exist we show that last-touch methods become inecient and a method based on the Shapley value is more protable for a wide range of campaign parameters. Using data from a large scale online campaign we apply the model's insights and show evidence for baseline exploitation. An estimate of the publishers' Shapley value is then used to distinguish exective publishers from the exploiting ones, and can be used to aid advertisers to better optimize their campaigns.

University of Pennslyvania- The Wharton School
Berman, Ron
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