Google: Master of the Auction

People usually think of eBay as the master auctioneer of the internet age. As this month’s Wired points out, however, Google is the real master.

People usually think of eBay as the master auctioneer of the Internet age.  As this month’s Wired points out, however, Google is the real master.

Google famously uses auctions to decide which ads appear in which positions when you do a search.  But Google takes auctions much further:

Google even uses auctions for internal operations, like allocating servers among its various business units. Since moving a product’s storage and computation to a new data center is disruptive, engineers often put it off. “I suggested we run an auction similar to what the airlines do when they oversell a flight. They keep offering bigger vouchers until enough customers give up their seats,” [Google Chief Economist Hal] Varian says. “In our case, we offer more machines in exchange for moving to new servers. One group might do it for 50 new ones, another for 100, and another won’t move unless we give them 300. So we give them to the lowest bidder—they get their extra capacity, and we get computation shifted to the new data center.”

4 thoughts on “Google: Master of the Auction”

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