An Algorithm for Allocating Sponsored Recommendations and Content: Unifying Programmatic Advertising and Recommender Systems

Retailing and media platforms recommend two types of items to their users: sponsored items that generate ad revenue and nonsponsored ones that do not. The platform selects sponsored items to maximize ad revenue, often through programmatic auctions, and nonsponsored items to maximize user utility with a recommender system (RS). We develop a binary integer programming model to allocate sponsored recommendations considering dual objectives of maximizing ad revenue and user utility. We propose an algorithm to solve it in a computationally efficient way. Our method is a form of postfiltering to a traditional RS, making it widely applicable in two-sided markets. We apply the algorithm to data from an online grocery retailer and show that user utility for the recommended items can be improved while reducing ad revenue by a small amount. This multiobjective approach unifies programmatic advertising and RS and opens a new frontier for advertising and RS research. We provide an extended discussion of future research topics.