Case study: Online advertising
Consider a company that wants to advertise a product on various websites through digital banners, aiming to attract visitors to the product landing page. Among multiple alternatives, the advertiser company wants to find out which banner is the most effective and has the maximum click-through rate (CTR), which is defined as the total number of clicks an ad receives divided by the total number of impressions (number of times it is shown).
Every time a banner is about to be shown on a website, it is the advertiser's algorithm that chooses the banner (for example, through an API provided by the advertiser to the website) and observes whether the impression has resulted in a click or not. This is a great use case for a MAB model, which could boost the clicks and product sales. What we want the MAB model to do is to identify the ad that performs the best as early as possible, display it more, and write off the ad(s) that is(are) a clear loser(s) as...