Multi‐period revenue management model for internet advertising

In this article, we expand the revenue management (RM) horizon to online advertising, that is internet advertising. Easy and cheap measurability of all its statistics make the internet a potential area for forecasting‐based allocation. The focus of this research is on banner advertisements and we deal only with the ‘home page’. We develop a multi‐period space‐allocation model to make a trade‐off between price‐per‐view (PPV) and price‐per‐click (PPC) pricing schemes, taking into account various characteristics of the internet like non‐uniform demands by advertisers and unpredictable web‐traffic. We compare our RM model with the first‐come‐first‐serve policy and fixed capacity bucket policy (FCB) under which fixed advertising space is allocated to either of the advertising categories (PPV or PPC). A RM approach yields about 16–20 per cent more revenue when compared to the FCB and about 80 per cent over the first‐come‐first‐serve policy.