The Impact of Privacy Measures on Online Advertising Markets

40 Pages Posted: 18 Feb 2021 Last revised: 16 Aug 2022

See all articles by Miguel Alcobendas

Miguel Alcobendas

Yahoo! Research

Shunto Kobayashi

California Institute of Technology

Matthew Shum

California Institute of Technology

Date Written: February 10, 2021

Abstract

Privacy protection measures in online markets have ramped up in recent years, typified by both government initiatives, as well as firm-level actions such as designing web browsers which block “third-party cookies” by default. We estimate a structural model of auctions in online advertising using bid-level auction data from Yahoo. Then we simulate several counterfactual scenarios, focusing on evaluating the likely effects of Google’s announced plan, starting in 2023, to block third-party cookies by default on Chrome, its market-leading browser. We find that such a ban would reduce publisher revenue by 45%, and bidder (advertiser) surplus by 35%. Moreover, our simulations also indicate that, amidst a third-party cookie ban, bidders who are able to leverage their informational advantage on users can gain surplus from the ban.

Keywords: privacy, online advertising, third-party cookies, California Consumer Privacy Act, structural estimation, auctions with entry

Suggested Citation

Alcobendas, Miguel and Kobayashi, Shunto and Shum, Matthew, The Impact of Privacy Measures on Online Advertising Markets (February 10, 2021). Available at SSRN: https://ssrn.com/abstract=3782889 or http://dx.doi.org/10.2139/ssrn.3782889

Miguel Alcobendas

Yahoo! Research ( email )

United States

Shunto Kobayashi

California Institute of Technology ( email )

Pasadena, CA 91125
United States

Matthew Shum (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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