Study: Online Ad Value Spikes When Data Is Used to Boost Relevance

WASHINGTON, Feb. 10, 2014 /PRNewswire-USNewswire/ -- Online advertising that uses cookie technology to increase relevance by leveraging consumers' information generates significantly greater economic value than advertising without cookies, according to an economic study by Professors Howard Beales and Jeffrey Eisenach of Navigant Economics. This new research has important implications for publishers, ad technology firms, agencies, advertisers, consumers and policy makers.

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The study, conducted on behalf of the Digital Advertising Alliance (DAA), found that the availability of cookies to facilitate information transfer increases the average impression price paid by advertisers by 60 percent to 200 percent.  Additionally, ads for which cookie-related information was available sold for three to seven times more than ads without cookies.

The full study is available at http://www.aboutads.info/resource/fullvalueinfostudy.pdf .

The study – which focuses specifically on the economic value generated by multiparty ad exchanges – also revealed that while online publishers of all sizes rely on external advertising exchanges and other third-party advertising technologies, smaller Web sites depend on them for a significantly greater portion of their advertising revenue.

"The study vividly demonstrates how data and relevance, based on responsible data collection and use, are increasingly essential to the existence of a thriving, ad-supported Internet," DAA Managing Director Lou Mastria said. "The added economic value generated by the conscientious use of data directly benefits consumers by sustaining innovative services and diverse content online. DAA will continue to work to ensure that as users continue to reap the great benefits of the ad-supported Internet, they do so while retaining choice and control over how and whether information is used, whether on the desktop or increasingly in mobile environments."

"Publishers of all sizes and advertisers rely on a multi-party ecosystem to deliver ads, while industry self-regulation addresses consumer privacy concerns by providing enhanced transparency and choice," DAA General Counsel Stuart Ingis.

The study observed purchasing behavior for two online advertising exchanges with automated bidding, and tracked the value of ads sold through those services. It also presents data regarding the types of display advertising used by the top 4,000 publishers (by traffic rank).  It reveals that the top-ranked Web sites rely on third-party advertising technology models for a plurality of their ad delivery, and that "long tail" publishers are even more reliant, accounting for approximately two-thirds of their advertising activity.

"Advertisers place tremendous value on consumer-related information, and pay a premium when information is available," said Beales, a George Washington University professor and former director of the Federal Trade Commission's Bureau of Consumer Protection. "Our research suggests that the dynamism and expansion of the online advertising marketplace is strongly linked to effective information exchange."

The study also focused on publishers' usage of multiparty exchanges, and found a strong correlation between the size of Web sites and the extent to which they rely on external advertising services.

"Publishers of all shapes and sizes rely on third-party advertising technologies,  but our research reveals that smaller publishers depended on it far more heavily than larger ones," said Eisenach.  "Restricted information availability would clearly cause disproportionate harm to smaller web sites," said Eisenach.

About The DAA Self-Regulatory Program for Online Behavioral Advertising: The DAA Self-Regulatory Program (http://youradchoices.com) for Online Behavioral Advertising was launched in 2010 by the Digital Advertising Alliance (DAA) (http://aboutads.info), a consortium of the nation's largest media and marketing associations including the American Association of Advertising Agencies (4A's), the Association of National Advertisers (ANA), the American Advertising Federation (AAF), the Direct Marketing Association (DMA), the Interactive Advertising Bureau (IAB) and the Network Advertising Initiative (NAI). These associations and their thousands of members are committed to developing effective self-regulatory solutions to consumer choice for online data.

Reactions from DAA's Founding Organizations

Randall Rothenberg, President and CEO of the Interactive Advertising Bureau 
"This research provides crucial evidence that consumer data, and the content relevance it provides, are critical to the health of the digital advertising industry and the media it supports. The study shows why effective, transparent information exchanges between users and marketers are so important to the future of the Internet, and to the consumer economy itself."

Nancy Hill, President and CEO of the 4As   
"The economic data clearly corroborates what advertisers have observed for years: that relevancy improves the value of advertising, to the benefit of advertisers, brands, and most importantly, consumers.

James Edmund Datri, President and CEO of the American Advertising Federation 
"The study confirms that the continued survival of the 'long tail' of small and mid-sized Web sites – like those of thousands of AAF members across the country – relies heavily on the existence of a robust, data-driven multiparty advertising infrastructure. The health of that infrastructure is critical to maintaining the breadth and diversity of free Internet content, which is good for everyone, advertisers and consumers alike."

Bob Liodice, President and CEO of the Association of National Advertisers  
"Representing a wide range of the largest advertisers in the world, it comes as no surprise to us that data and relevance, which drive successful online content delivery, are crucial to the success of the interactive community.   This important new study strongly demonstrates why effective, transparent information exchange between users and advertisers is so important to the future of the Internet."  

Linda Woolley, President and CEO of the Direct Marketing Association  
"This study demonstrates that the real value of data is in its exchange across the data-driven marketing economy, as identified in a recent DMA 'Value of Data' academic study.  The DAA's new report provides powerful confirmation of the tremendous value of marketing data to consumers, advertisers, and the global Internet ecosystem.  It highlights the importance of ensuring that data-driven marketing models continue to include ubiquitous transparency and user choice."

Marc Groman, President and CEO of the Network Advertising Initiative 
"The study is the latest in a growing body of evidence affirming the economic value of data-driven marketing and the importance of responsible third parties in the global economy."

SOURCE Digital Advertising Alliance