Evaluating The Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple's App Tracking Transparency *

39 Pages Posted: 5 Feb 2024

See all articles by Guy Aridor

Guy Aridor

Northwestern University - Kellogg School of Management

Yeon-Koo Che

Columbia University

Brett Hollenbeck

University of California, Los Angeles (UCLA) - Anderson School of Management

Daniel McCarthy

University of Maryland - Robert H. Smith School of Business

Maximilian Kaiser

University of Hamburg

Multiple version iconThere are 2 versions of this paper

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

Aridor, Guy and Che, Yeon-Koo and Hollenbeck, Brett and McCarthy, Daniel and Kaiser, Maximilian, Evaluating The Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple's App Tracking Transparency * (June 13, 2024). Available at SSRN: https://ssrn.com/abstract=4698374 or http://dx.doi.org/10.2139/ssrn.4698374

Guy Aridor (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

Yeon-Koo Che

Columbia University ( email )

420 W. 118th Street
New York, NY 10027

Brett Hollenbeck

University of California, Los Angeles (UCLA) - Anderson School of Management ( email )

110 Westwood Plaza
Los Angeles, CA 90095-1481
United States

Daniel McCarthy

University of Maryland - Robert H. Smith School of Business ( email )

Maximilian Kaiser

University of Hamburg

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