Mohamed Ibrahim’s Blog

Some thoughts about image and text ads

Lately, I’ve been thinking about whether mixing text and image ads is really profitable. The case that most advertising companies (like Google adsense, adbrite and lots of others) make is that allowing image ads in the same ad unit as text ads is usually better because they compete in price with text ads. But, my understanding is that image ads will only show if they beat the highest text ad price. I tried to analyze and see whether the final profit will be larger in case of mixed ads or not and I found conditions for image ads to make more money if allowed to compete against text ads in the same ad unit.

Symbols

$P_i$ Probability to click an image ad

$P_t$ Probability to click a text ad

$N$ Number of text units inside the ad

$C_{ti}$ Cost per click for image ad unit number i

$C_t=\frac{1}{N}\sum_{i=1\ldots N}C_{ti}$ Average cost per click for text ads

$C_i$ Cost per click for image ads

$M_i$ The money made through image ads

$M_t$ The money made through text ads

$I_i$ The number of impressions of image ads

$I_t$ The number of impressions of text ads

$D_i$ The dollars profit of image ads

$D_t$ The dollars profit of text ads

$Z_i$ The number click throughs of image ads

$Z_t$ The number click throughs of text ads

So,

$M_t=NP_tC_t$

$M_i=P_iC_i$

If an image ad wins the auction, this implies $C_i > MAX[C_{ti}] > C_t$ . However, for the image ad to be more profitable the average money that it will generate must be more than the average money that the text ad will generate, i.e. $M_i>M_t$ which is $P_iC_i>NP_tC_t$ .

However, I do believe (although I don’t have enough statistics yeet) that $P_i\approx P_t$ and might be slightly higher, but not much bigger. That leaves us with $C_i>NC_t$ , which means that the condition for the image ads to actually generate larger profit is

$C_i>\sum_iC_{ti}$

i.e. the payout of the image ad has to be more than the sum of all the payouts of the text ad units. This is based on the assumption that the probabilities of text and image clicks are approximately the same. Since the ratio $P_i/P_t$ is not actually known, the worst case scenario is that $P_i=P_t$ since in average image ads are more appealing to people and usually will get seen more. In that case, the condition earlier can be used as a sufficient condition for an image ad winning a campaign over a set of text ads and be of higher profit.

But from our point of view, and given that we know that advertisers do not apply this criteria how can we determine whether or not to let image ads run in the auction? To answer that question we note that $C_i>C_t$ as the image ad won the auction. This is because $C_i>MAX[C_{ti}]>C_t$ . For the inequality $P_iC_i>NP_tC_t$ to always be true, we need to make sure that $P_i>NP_t$ as well. If the latter is true, then the inequality holds at all times, and an auction winning image ad will be more profitable than the N text units.

This boils down to knowing the ratio $P_i /P_t$ which is required to be $P_i/P_t>N$ . We can actually know this ratio by running an only text ad, and an only image ad that alternate in the same ad spot and of course having two different channels or ad zones. Using the stats of your ad server (adsense/adbrite or any other), then you can determine $M_t=D_t/I_t$ and can approximate $C_t$ by $D_t/Z_t$ , and $N$ is already known from the ad block that you chose, which is the number of text units in that block. Therefore $P_t=M_t/(NC_t)=Z_t/(NI_t)$ . Similarly you can find $P_i$ . If $P_i/P_t>N$ then you know for sure now that it is more profitable for you to allow image ads to bid against text ads in the same auction for that ad unit spot.

Disclaimer: The information above is stated as is with no guarantees of any type. Use it on your own risk.

Technorati Tags: adsense, analysis, adbrite, text ads, image ads, advertisement, profits, auction, bidding

Tags: adbrite, adsense, advertisement, analysis, auction, bidding, image ads, profits, text ads

This entry was posted on Wednesday, January 23rd, 2008 at 6:57 am and is filed under Google / Internet / Programming, Research / Scientific. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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Some thoughts about image and text ads

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