Will Privacy Regulation Reduce Ads’ Effectiveness?
In the European Union, it’s illegal to track consumers online with cookies without their consent (though the opt in/out question is still in the air). A recent study looked at what effect this regulation has had on purchase intent and, therefore, online ad effectiveness—and the results aren’t so pretty.
Looking at 3M+ Internet users and nearly 10,000 campaigns over 8 years, researchers asked users if they’d seen the ad and if they’d intended to purchase the product. They then compared the purchase intent based on the responses before and after the EU introduced its behavioral targeting regulations, as well as non-EU users’ purchase intent. MediaPost reports the results:
The researchers measured effectiveness by looking at the difference in purchase intent among the two groups. The report authors compared the results for users in EU countries and non-EU countries and concluded that Europe’s laws reduced effectiveness, as measured by purchase intent, by over 65%.
Unsurprisingly, sites with more targeted audiences (specialty content sites like travel or parenting sites, vs. general news sites) are less affected by the regulation.
Of course, it’s debatable whether it’s the regulation itself or the environment that fostered the regulation that’s affecting customers. Perhaps EU users are just more sensitive about targeting issues, and that’s why the EU already has privacy legislation:
Pace University’s Catherine Dwyer speculated that the shift could also have occurred as a result of greater consumer awareness in the EU about targeted ads, and not necessarily because marketers stopped using them.
[The University of Toronto’s Avi] Goldfarb responds that even if that’s the case, the greater awareness still seemed to come about as a result of regulations, which means that privacy laws contributed to a drop in ads’ effectiveness.
The US could soon follow in its footsteps: a bill is slated to be presented to Congress on behavioral targeting privacy soon. But that’s no guarantee the bill will pass.
What do you think? Is it privacy regulation or EU users that make the difference?