Web advertising “65%” less effective because of privacy laws
14. Feb, 2011 
4 Comments (1,981 views)
by Public Policy
We’ve just finished reading through a very interesting study which looks into the effects of the 2002 ePrivacy Directive on banner advertising, and finds that after the law was in place, adverts on EU sites were 65% less effective – quite a large difference, and one that perhaps helps to explain the differences between the EU and other areas of the world when it comes to developments on the web.
The study, done by Avi Goldfarb and Catherine E. Tucker, examined nearly 10,000 web campaigns from 2001 to 2008, and measured their perceived effectiveness on web users. They found that ads placed on European sites were affected by the tighter rules on consent for use of cookies, bugs and so on, and so were less effective.
The authors point out that ads seen by Europeans on non-EU sites were not any less effective, and non-Europeans looking at EU pages also found them less effective.
There are two things that we found particularly interesting:
- The estimated spend on web advertising is currently around $8bn, but if privacy rules were tightened, advertisers would have to spend $14.8 billion to maintain the same impact – and this would probably mean more and more intrusive adverts on websites.
- The effect of privacy rules was more profound on general sites like news, meaning that tightening privacy rules affects this already hard-hit sector.
As Commissioner Reding prepares to announce her proposals for a revision of the European privacy rulebook, this study provides interesting empirical evidence of the potential economic impacts of those rules on one of the important cornerstones of people’s Internet experience.
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what type of society and life do we wish? what is the cost of this society? do we want all our data (private data that we are not conscious we are giving away) used or abused without control? i personally prefer that companies – and with them, we all -bear the costs of a more expensive advertising. thanks for this interesting blog!
Hi there – thanks a lot for your thoughts, and congratulations for being the first to post a comment to the blog! I think that the data protection discussions do indeed point to deeper questions about values in society. I also agree that citizens should definitely be informed of what personal information is being used by companies. Perhaps in that way, together with better control for internet users on which data can be used, people will feel more able to share information online. Advertising is an important part of the internet ecosystem – it’s why we can enjoy lots of free services. Making those adverts less relevant will make them less effective (as long as people are aware that is what is happening), and will probably mean more adverts cluttering up webpages. I think the future will be a mix of services, some ad-funded, some paid for by users. We should allow all those possibilities, and not shut down the possibility for people to access free email or music services if they want to, and are happy for their browsing history to be used as part payment. What is necessary, perhaps, is for companies to respect those choices, and be completely open about what they use and how.
Jaymeen
In your article, authors point out that ads seen by Europeans on non-EU sites were not any less effective, and non-Europeans looking at EU pages also found them less effective? why do you think they said that?
As the authors themselves note, “This suggests that the change in e ffectiveness we observe is not linked to time-varying changes in consumer attitudes in Europe relative to the US.“