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Digital Advertising and Market Structure: Implications for Privacy Regulation

Author

Listed:
  • Daniel Deisenroth
  • Utsav Manjeer
  • Zarak Sohail
  • Steven Tadelis
  • Nils Wernerfelt

Abstract

We study how changes in the effectiveness of targeted digital advertising shape firm behavior and product-market outcomes. We leverage the introduction of Apple's App Tracking Transparency (ATT) framework, which limited online advertisers' access to user data and thus substantially reduced their advertising effectiveness. Using proprietary advertiser-level data from Meta and industry-level outcomes from the Bureau of Labor Statistics, we show that greater exposure to the ATT shock led to lower ad spend, fewer establishments, and higher product prices. The findings suggest that digital advertising primarily expands markets and that privacy policies can have unintended consequences on product market competition.

Suggested Citation

  • Daniel Deisenroth & Utsav Manjeer & Zarak Sohail & Steven Tadelis & Nils Wernerfelt, 2024. "Digital Advertising and Market Structure: Implications for Privacy Regulation," NBER Working Papers 32726, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:32726
    Note: IO PR
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    More about this item

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L10 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - General
    • L59 - Industrial Organization - - Regulation and Industrial Policy - - - Other
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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