Advertisers Pay 3 Times More for Cookie-Based Ads

But will consumer privacy regulation alter the landscape?

A new study from the Digital Advertising Alliance found that advertisers will pay a substantially higher premium for interest-based ads. While that may not seem so surprising, the study, to be unveiled late Monday during the Interactive Advertising Bureau's annual leadership meeting in Palm Desert, Calif., represents the first time the advertising industry has put hard data behind the premise that online behavioral advertising is the financial engine of the free and open Internet. 


Conducted by Navigant Economics, the study found that advertisers pay three times more per impression for cookie-driven ads, and seven times more if the cookie is 90-days old.

"There hasn't been a lot out there about the benefits of interest-based advertising and what it has delivered to the Internet. This shows interest-based advertising is the workhorse for subsidizing content on the Internet," said Lou Mastria, managing director of the DAA, which plans to share the results of the study with policymakers in Washington.

Advertisers have managed to hold off regulators and new legislation in Washington that could limit targeted ads. But recent events like the Snowden revelations of government surveillance and data breaches at Target and Neiman Marcus have renewed the debate over commercial data collection practices, big data and consumer privacy. Though the words "Do Not Track" haven't been bandied about lately, the White House Monday is meeting with consumer privacy advocates as part of its comprehensive review into big data and consumer privacy. 

Without the financial premium interest-based ads deliver, publishers large and small could face significant revenue decline. Small websites, dependent on interest-based ads for 60 percent of their ad revenue, would suffer the most, the study showed. 

"The kind of content available on the Internet is based on the money that will fund it and that's the sale of advertising, which is everyone's business model these days," said Prof. Howard Beals, one of the authors of the study.

In other words, free content might disappear, more content might go behind a pay wall, and the health of the Internet marketplace could suffer.

Mastria is optimistic that the ad industry is making headway in convincing regulators and lawmakers that the industry can be counted on to provide consumers with transparency, notice and choice through its ad choices self-regulatory program.

"We're not at the end of the road, but we're on the road. Our work isn't done," Mastria said. "The reality is we're hearing more and more they understand."

Navigant conducted the study by analyzing the value of ads sold on two online ad exchanges with automated bidding.