  A mediator is a well-known construct in game theory, and is an entity that
plays on behalf of some of the agents who choose to use its services, while the
rest of the agents participate in the game directly. We initiate a game
theoretic study of sponsored search auctions, such as those used by Google and
Yahoo!, involving {\em incentive driven} mediators. We refer to such mediators
as {\em for-profit} mediators, so as to distinguish them from mediators
introduced in prior work, who have no monetary incentives, and are driven by
the altruistic goal of implementing certain desired outcomes. We show that in
our model, (i) players/advertisers can improve their payoffs by choosing to use
the services of the mediator, compared to directly participating in the
auction; (ii) the mediator can obtain monetary benefit by managing the
advertising burden of its group of advertisers; and (iii) the payoffs of the
mediator and the advertisers it plays for are compatible with the incentive
constraints from the advertisers who do dot use its services. A simple
intuition behind the above result comes from the observation that the mediator
has more information about and more control over the bid profile than any
individual advertiser, allowing her to reduce the payments made to the
auctioneer, while still maintaining incentive constraints. Further, our results
indicate that there are significant opportunities for diversification in the
internet economy and we should expect it to continue to develop richer
structure, with room for different types of agents to coexist.
