Economic Consequences of Online Tracking Restrictions: Evidence from Cookies

TL;DR

This study estimates the economic impact of restricting cookie lifetimes in Europe, revealing significant revenue losses for publishers and implications for online advertising strategies.

Contribution

It provides the first comprehensive empirical analysis of the economic consequences of cookie lifetime restrictions for publishers.

Findings

Restricting cookies to one year reduces their value by 25%.

Cookie restrictions could endanger up to EUR 904 million annually in ad revenue.

Average cookie lifetime is 279 days with a value of EUR 2.52.

Abstract

In recent years, European regulators have debated restricting the time an online tracker can track a user to protect consumer privacy better. Despite the significance of these debates, there has been a noticeable absence of any comprehensive cost-benefit analysis. This article fills this gap on the cost side by suggesting an approach to estimate the economic consequences of lifetime restrictions on cookies for publishers. The empirical study on cookies of 54,127 users who received 128 million ad impressions over 2.5 years yields an average cookie lifetime of 279 days, with an average value of EUR 2.52 per cookie. Only 13% of all cookies increase their daily value over time, but their average value is about four times larger than the average value of all cookies. Restricting cookies lifetime to one year (two years) decreases their lifetime value by 25% (19%), which represents a decrease in the value of all cookies of 9% (5%). In light of the EUR 10.60 billion cookie-based display ad revenue in Europe, such restrictions would endanger EUR 904 million (EUR 576 million) annually, equivalent to EUR 2.08 (EUR 1.33) per EU internet user. The article discusses these results' marketing strategy challenges and opportunities for advertisers and publishers.