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I started down the path of reverse engineering what A/B Tests different web sites were running. One interesting discovery is how many websites rotate their big banner spot (usually Flash) on the home page.

I'm wondering what people can tell me about the economics of why companies do this? You can explore my thoughts here, but I'd like to hear from others who might work at Microsoft, Apple, Dell, and other companies that use this technique?

Tags: ab testing, website optimization

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they are likely using the one-armed bandit optimization scheme, or multiple armed bandit whose most famous member is known as the restless bandit.

in essence, they start with "any ad", throw it up on the wall, monitor its performance, estimate its convergence point, do a bit of optimization calculus to determine at what point past performance of the rest of the ads in the stack tell them to take down the current loser and replace it with another ad.

Don't forget, this is done for remnant ad inventory which comprises most of the marquee/banner ads almost nobody ever, ever clicks on purpose. Such are usually used for pure branding purposes since the CPC is so low due to the fact that nobody can effectively model who is going to be receptive to irrelevance their past browsing has literally trained their eyes not to see anymore.

it isn't Dell, Microsoft or even ell doing this; most often it is their own SEM/SEO folks who could likely be contractors at companies like MediaPlex who do this low-level keyword optimization stuff for a living!

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