Patent ID: 8175950

Claim:
A computer-implemented method for determining a bid price of an advertisement, the method comprising: dividing a time period beginning at an initial time into a set of learning periods associated with the advertisement; generating a set of expected revenue rates for the set of learning periods; estimating, using a processor, a cost for communicating the advertisement over the Internet, in the learning period starting at the initial time; determining, using a processor, a current option value based on the estimated cost by: (a) for a final learning period in the set of learning periods, determining a continuation value representing the expected profit over the final learning period and an option value representing a value of the option to stop communicating the advertisement over the Internet, at the beginning of the final learning period; (b) starting with a learning period immediately preceding the final learning period, (i) determining a continuation value representing a value of continuing to communicate the advertisement over the Internet, the continuation value based on the expected revenue rate for the learning period and the continuation values of later learning periods, (ii) determining an option value representing a value of the option to stop communicating the advertisement over the Internet, at the beginning of the learning period, the option value based on the continuation value for the learning period, and (iii) repeating steps (i) and (ii) for each prior learning period until an option value is determined for the learning period starting at the initial time; and (c) a setting the current option value equal to the option value determined for the learning period starting at the initial time; if the current option value is not zero, adjusting the estimated cost and repeating steps (a), (b), and (c); if the current option value is zero, setting the bid price equal to the estimated cost; and communicating, over the Internet, the bid price to an advertising exchange that communicates online advertising over the Internet.