What is new in inventory models (part 2)?
Posted by Sridhar Tayur on Fri, Feb 12, 2010 @ 02:18 AM
Something entirely different from the supply chain inventory models I discussed earlier has to do with inventory elements in video games.
Unlike early generations of video games that had advertisements 'hard coded' in the CDs played on individual consoles, the current generation of video games are played over the internet, and the games are shipped from the game developer with blanks where ads can be placed in real time while the game is being played. This is called scheduling of dynamic in-game advertisements, and is also the title of a paper (I am a co-author along with John Turner and Alan Scheller-Wolf) that was accepted (just last week) for publication in Operations Research.
Massive Incorporated (acquired by Microsoft, after Google acquired Adsense) and CMU have worked collaboratively to develop algorithms to optimally schedule ads. My friend Katherine was its COO, and there is a HBS Case on her and Massive. David -- the CTO -- and his staff, in particular Frank, were the folks we worked with on a day-to-day basis. What is the optimization? The sales force of Massive negotiates contracts from companies such as Pepsi that pay a ceratin amount of money for a certain amount of impressions (of their ads), in specfic games (targeted at specific demographics) at specific times over a pre-defined time horizon. There are severe penalties if the impressions are under-delivered compared to contracted amount, and there are restrictions to avoid saturation as well as conflict (with competing brands) and so on. Now the demand for these ads is stochastic -- it depends on who is playing, in what part of the world, at what times and how many levels they manage to progress to and so on -- and so the algorithm aims to place the ads appropriately.
I expect that an on-line version of the paper will become available soon in the Articles in Advance series. I hope you enjoy it.