Tuesday, May 26, 2009

Google, Auction Theory, and Ads

Wired Magazine has an excellent and interesting article about Google's hiring of economists who understand auction theory.

To quote a paragraph from the article:

But as the business grew, Kamangar and Veach decided to price the slots on the side of the page by means of an auction. Not an eBay-style auction that unfolds over days or minutes as bids are raised or abandoned, but a huge marketplace of virtual auctions in which sealed bids are submitted in advance and winners are determined algorithmically in fractions of a second.

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