If the Cookie Crumbles, So Will Ad Revenues

Everyone from legislators in Washington to the horde of privacy activist online has had harsh words for internet cookies. Yet, whether it’s anonymous statistics, cookies, or Google’s forthcoming AdID system, advertisers are paying up to a seven times more for relevant advertising according to a recent study from the Digital Advertising Alliance (DAA).

The study, which was conducted by Howard Beales, a George Washington University professor and former director of the Federal Trade Commission’s Bureau of Consumer Protection, and Jeffrey Eisenach of Navigant Economics, observed that advertisers were willing to pay between three and seven times more for cookie assisted ads than ads without cookies. The study also found that cookies increase the average impression price advertisers paid by between 60% and 200%.

“We saw that the interest in customer data does drive up the value of advertising, which leads to funding for content and services that consumers generally get for free,” says DAA Managing Director Lou Mastria.

The study underscores the value of targeted ads in today’s digital environment, where privacy is less of a commodity or trend and more of a standard.  “We saw in a previous study that 70% of folks don’t mind advertising, as long as it is relevant advertising,” Mastria notes.

Since the internet’s inception, cookies, particularly those of the third party variety, have been the dominant method of tracking consumers’ online activity in order to bring more tailored ad experiences. However, cookies and other forms of tracking have come under intense fire in recent months. Browser developers like Google and Mozilla are already taking steps to alter, or abolish the current tracking model by implementing default “Do Not Track” (DNT) policies or abandoning third party cookie support altogether.

The study, however, asserts that the tracking mechanism is largely irrelevant. “That 3x to 7x premium is what’s at stake here,” says Mastria. “The fact that we used cookies in our study is immaterial. What matters is information transfer. For relevance to be there, that’s what’s material.”

The DAA, a coalition that includes associations such as the Direct Marketing Association and Association of National Advertisers, has worked to balance consumer control with the ad-funded internet model through its Ad Choices icon program, a consumer education program that informs users about relevant advertising and gives them the option to opt out of cookie tracking.

“Everyone agrees that data has value,” Mastria explains.  “With this study we wanted to put some hard numbers on that.” 

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