Commentary

Behavioral Advertising's Benefits To Publishers Are Overstated, New Study Suggests

For years, the ad industry has argued that free content online is fueled by online behavioral advertising, or tracking users across the web in order to deduce their interests and serve them with targeted ads. 

The argument turns on the assumption that advertisers will pay more for targeted ads than generic ones, and that publishers will therefore garner more money from behaviorally targeted ads.

The claims -- which make some intuitive sense -- appear to have been widely accepted, even making their way into official policy documents. Last year, the Federal Trade Commission suggested in a staff report that publishers would be harmed by privacy rules that limited online tracking.

“If consumers were opted out of online advertisements by default (with the choice of opting in), the likely result would include the loss of advertising-funded online content,” the FTC said in its report.

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But a new study by researchers at Carnegie Mellon, the University of Minnesota and University California Irvine suggests that benefits to publishers from behavioral targeting may have been overstated.

For the study, researchers Alessandro Acquisti Veronica Marotta and Vibs Abhishek examined millions of ads that appeared online during one week in May of 2016, on websites owned by a large media company. (The study doesn't identify the company.)

The authors found that the media company received more revenue when tracking cookies were available to ad-tech companies -- but not that much more. Specifically, the study found that the publisher was able to increase revenue by just 4% when users' cookies were available.

In dollar figures, the difference amounted to $0.00008 per ad. Of course, that can add up over time. The authors do the math, and find that a website that sells an average of 4 million ads per day would lose around $320 per day by eschewing tracking cookies.

But the researchers also note that some of that extra revenue may be offset by the costs of complying with new privacy rules in Europe.

The study comes with some caveats. Among others, the report only looks at sites owned by a single company. “While we believe the results to be applicable to publishers of the same size and type, they may not generalize to the entire universe of existing websites,” the authors write.

Still, they say, the results “can inform the debate on the benefits of tracking technologies ... and into the potential implications of data regulations limiting the ability of ad companies to track users.”

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