Autobidding Auctions with LLM-Powered Creatives

The integration of Large Language Models (LLMs) into ad auctions for dynamic creative enhancement presents a paradigm shift, yet introduces significant computational costs disrupting traditional mechanism design. This paper provides a comprehensive game-theoretic and algorithmic framework for such LLM-augmented auctions. We model the system as a dynamic Stackelberg game where the platform (leader) strategically invests in creative enhancement to maximize net revenue, while autobidding agents (followers) respond to enhanced ad qualities under budget constraints. To endogenize inference costs, we propose the Platform-Investment Mechanism (PIM). We develop the Online Dual-Descent Bidding with Regularization (ODDB-R) algorithm for agents to learn optimal bidding strategies in this non-stationary environment. For the platform, we formulate the investment problem as a continuous control task and solve it using a Two-Timescale Stackelberg Learning with Proximal Policy Optimization (TTSL-PPO) algorithm, which provably converges to a Stackelberg Stationary Point. Extensive experiments on large-scale real-world datasets and state-of-the-art LLMs demonstrate that our framework significantly outperforms heuristic baselines in revenue, social welfare, and user engagement.