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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?

  • http://www.adroll.com Rebecca

    Wow, those are some eye-opening stats. While I agree that the privacy of users should always be respected, I think that if consumers took a step back and really examined the process of retargeting (assuming it’s done properly – ie. with the use of tools like frequency caps), they would realize that it can actually benefit them in the long run. Let’s face it, we’re all going to be shown ads whenever we’re online, right? Wouldn’t it make more sense for those ads to be for things we like and can actually use? Thanks for the great post!

  • http://www.imgreenbook.com wilson

    Tracking a user using cookies sounds more like affiliate marketing rather than banner ads that convince a buying decision. After reading the result of the study I still can’t make a sense how a privacy law can cause banner ads sale to decline in effectiveness.

  • http://pglewis.co.uk Paul Lewis

    Wilson, In terms of the display advertising

    Will online display advertising, such as re-targeting campaigns that utilize cookies to track current or potential customers that have interacted withyour brand before stop being used or at worse become illegal –

    Wrote more about it here if you are interested.

    http://pglewis.co.uk/random-thoughts-of-an-internet-geek/2010/03/are-the-same-ads-haunting-your-internet-usage
    .-= Paul Lewis´s last blog ..iPad Versus the Kindle – Too many technologies or a killer in the mist? =-.

  • http://www.ioninteractive.com Kristina Allen

    I agree with Rebecca – the more educated users are about what behavioral targeting is, the more accepting they are likely to be. In one of my graduate courses some of my classmates were expressing anger that Websites track them and seem to know everything about them. It was a common misconception that companies do this to in some way steal their information – they thought this would easily lead to identity theft, or even credit card theft. When I explained the information is collected mostly to serve up information to benefit the user – by offering them ads of interest – the discussion became much less heated. Many even agreed that this was a good thing