Targeted online advertising uses tracking technologies to serve ads to you based on your browsing history. Studies suggest that this approach is more lucrative for advertisers than contextual advertising, at the potential expense of users’ privacy. But, new research performed by researchers in information technology suggests that online publishers — the content creators where ads are served (i.e. websites like ZME Science) — gain very little. The findings suggest that publishers make just 4% more from target advertising compared to serving non-targeted ads.
Creepy ads don’t really make content creators more money
The online media landscape has not been kind to online publishers. Although more and more companies are buying online ads, most publishers are reporting stagnant or declining revenues. That’s because most of the revenue from digital advertising in being raked by Google and Facebook, the adtech duopoly. In the US, the pair accounts for 60% of digital ad market spending or $76.56 billion. In the last year, this duopoly has been mildly shaken — but not by some recovery on behalf of publishers but rather by the operations of another tech giant, Amazon.
This ad market ecosystem has come to be dominated by behavioral advertising, which serves targeted ads. This kind of environment encourages the proliferation of tracking technologies that often fall in a gray-area of privacy. The alternative is contextual advertising which selects an ad based on the content being viewed, device type, and location.
Both advertisers and adtech firms have economic incentives to push behavioral advertising in the detriment of non-targeted ads, as this approach can lead to more growth and can extract more value from users. Content producers, however, seem to gain very little despite the fact that they may use privacy-hostile providers (which is basically every major adtech platform operating today). And as if ad tech wasn’t bad enough, virtually every mobile app is tracking users. A recent Washington Post analysis revealed that an iPhone equipped with common apps was sending data to 5,400 hidden app trackers. So, it’s really no wonder why VPNs like PIA are becoming increasingly popular.
In a new study titled Online Tracking and Publishers’ Revenues: An Empirical Analysis, researchers at the University of Minnesota, University of California Irvine, and Carnegie Mellon University, analyzed a dataset of millions of display ad transactions completed in a week by a large publisher. Since the dataset also included the visitor’s cookie ID, the researchers could determine whether a target or non-target ad was being shown, and what the difference in price between the two types of ads was.
This analysis showed that publishers gain only 4% from targeted ads vs non-targeted ads or an average increase of $0.00008 per advertisement. In an article for TechCrunch, Natasha Lomas writes:
“Bearing that “invasive surveillance” in mind, a 4% publisher ‘premium’ for privacy-hostile ads vs adverts that are merely contextually served (and so don’t require pervasive tracking of web users) starts to look like a massive rip off — of both publisher brand and audience value, as well as Internet users’ rights and privacy.”
If you factor in the hidden costs of trading user privacy, publishers may actually stand to lose money by implementing targeted ads. For instance, the International Association of Privacy Professionals estimates that Fortune’s Global 500 companies will spend around $7.8 billion on compliant costs to meet the requirements of Europe’s General Data Protection Regulation (GDPR).
The study is one of the few to offer empirical verification and insights into the transactions of the digital ad supply chain, which almost everyone in the industry seems to agree that it is too complex and opaque.
“The results contribute to the current debate over online behavioral advertising, and how benefits accrued from tracking and targeting online consumers may be differentially allocated to various stakeholders in the advertising ecosystem.”