Evaluating The Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple's App Tracking Transparency *
39 Pages Posted: 5 Feb 2024
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Evaluating The Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple's App Tracking Transparency *
Evaluating the Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple’s App Tracking Transparency
Date Written: June 13, 2024
Abstract
In the backdrop of heightened data privacy concerns, governments and firms have introduced various privacy regulations. Assembling novel datasets on online advertiser spending, performance, and revenue, we quantify the economic effects of Apple's App Tracking Transparency (ATT) privacy policy on e-commerce firms. Our paper extends prior literature by uncovering the effect of ATT on not only advertising effectiveness but also changes in firm-side strategy to mitigate the effects of ATT and the resulting net impact on overall firm revenue. We show that the performance of conversion-optimized Meta advertisements, which critically depend on third-party data for targeting and measurement, significantly worsened after ATT with a 37% reduction in click-through rates compared to click-optimized campaigns. Although advertisers substitute away from Meta for the Google ecosystem, those with a higher baseline dependence on Meta nevertheless experience a 37% reduction in firm-wide revenue. We find that this is driven primarily by steeper declines at smaller firms in the acquisition of new customers vis-a-vis retaining existing customers.
Keywords: Privacy Regulation, Advertising, App Tracking Transparency
JEL Classification: L50, K20, L81
Suggested Citation: Suggested Citation