Revenue Optimization with Approximate Bid Predictions Andres Munoz Medina Google Research 76 9th Ave New York, NY10011 Sergei V assilvitskii Google Research 76 9th Ave New York, NY10011

In the context of advertising auctions, finding good reserve prices is a notoriously challenging learning problem. This is due to the heterogeneity of ad opportunity types, and the non-convexity of the objective function. In this work, we show how to reduce reserve price optimization to the standard setting of prediction under squared loss, a well understood problem in the learning community. We further bound the gap between the expected bid and revenue in terms of the average loss of the predictor. This is the first result that formally relates the revenue gained to the quality of a standard machine learned model.