Privacy Regulation and Online Advertising

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. ∗Avi Goldfarb is Associate Professor of Marketing, Rotman School of Management, University of Toronto, 105 St George St., Toronto, ON. Tel. 416-946-8604. Email: [email protected]. Catherine Tucker is Assistant Professor of Marketing, MIT Sloan School of Business, 1 Amherst St., E40-167, Cambridge, MA. Tel. 617-252-1499. Email: [email protected]. We thank Glen Urban and participants at workshops at IDC, MIT, Michigan, the NBER Summer Institute, Northwestern, SICS, UC Berkeley, and Wharton for helpful comments.