Privacy Regulation and Online Advertising

36 Pages Posted: 5 May 2010 Last revised: 4 Mar 2014

Avi Goldfarb

University of Toronto - Rotman School of Management

Catherine E. Tucker

Massachusetts Institute of Technology (MIT) - Management Science (MS)

Date Written: August 4, 2010

Abstract

Advertisers use online customer data to target their marketing appeals. This has heightened consumers' privacy concerns, leading governments to pass laws designed to protect consumer privacy by restricting the use of data and by restricting online tracking techniques used by websites. We use the responses of 3.3 million survey-takers who had been randomly exposed to 9,596 online display (banner) advertising campaigns to explore how privacy regulation in the European Union has influenced advertising effectiveness. This privacy regulation restricted advertisers' ability to collect data on web users in order to target ad campaigns. We find that on average, display advertising became far less effective at changing stated purchase intent after the EU laws were enacted, relative to display advertising in other countries. The loss in effectiveness was more pronounced for websites that had general content (such as news sites), where non-data-driven targeting is particularly hard to do. The loss of effectiveness was also more pronounced for ads with a smaller presence on the webpage and for ads that did not have additional interactive, video, or audio features.

Keywords: Privacy, Online Advertising, Targeting

Suggested Citation

Goldfarb, Avi and Tucker, Catherine E., Privacy Regulation and Online Advertising (August 4, 2010). Available at SSRN: https://ssrn.com/abstract=1600259 or http://dx.doi.org/10.2139/ssrn.1600259

Avi Goldfarb

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6
Canada
416-946-8604 (Phone)
416-978-5433 (Fax)

Catherine E. Tucker (Contact Author)

Massachusetts Institute of Technology (MIT) - Management Science (MS) ( email )

100 Main St
E62-536
Cambridge, MA 02142
United States

HOME PAGE: http://cetucker.scripts.mit.edu

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