Big events at Northwestern this weekend, including Paul Milgrom’s Nemmers’ Prize lecture and a conference in his honor.  (My relative status was microscopic.)   A major theme of the conference was market design and I heard a story repeated a few times by participants connected with research and implementation of online ad auctions.

Ads served by Yahoo!, Google and others are sold to advertisers using auctions.  These auctions are run at very high frequencies.  Advertisers bid for space on specific pages at specific times and served to users which are carefully profiled by their search behavior.  This enables advertisers to target users by location, revealed interests, and other characteristics.

Not content with these instruments, McDonalds is alleged to have proposed to Yahoo! a unique way to target their ads and their proposal has come to be known as The Happy Contract.  Instead of linking their bids to personal profiles of users, they asked to link their bids to weather reports.  McDonalds would bid for ad space only when and where the sun was shining.  That way sunshine-induced good moods would be associated with impressions of Big Macs, and (here’s the winner’s curse) the foul-weather moods would get lumped with the Whopper.

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