Advertiser-First: A Receding Horizon Bid Optimization Strategy for Online Advertising

Online advertising has been the mainstream monetization approach for internet-based companies, in which bid optimization plays a crucial role in enhancing advertising performance. Currently, the bid optimization problem has narrowed down to two specific forms: Budget-constrained bidding (BCB) and Multi-constraint bidding (MCB). Existing solutions try to solve BCB/MCB via linear programming solvers, learning methods, or feedback control. However, in large-scale complex e-commerce, they still suffer from inefficiency, poor convergence, or slow adaptation to the changing market. This research presents an online receding optimization method as a solution for practical bid optimization problems. We conduct a theoretical analysis of the optimal bidding strategy's structure. Further, an online receding optimization process is designed based on open-loop feedback control, which periodically updates a constructed optimal bid formulation that can be solved by linear programming. Then, considering large-scale linear programming problems, we propose an efficient down sampling scheme. Besides, a neural-network-based auction scale prediction is used to adapt to the changing market. Finally, a series of online A/B experiments on <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">Taobao Sponsored Search</i> compare our work to industrial methods and state-of-the-art from several aspects. The proposed method has been implemented on <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">Taobao</i>, a billion-scaled online advertising business, for over a year.