Understanding Emerging Threats to Online Advertising | Budak, Goel, Rao, Zervas

Ceren Budak (Michigan), Sharad Goel (Stanford), Justin Rao (Microsoft), Georgios Zervas (Boston); Understanding Emerging Threats to Online Advertising; Research Paper No. 2505643, School of Management, Boston University; doi:10.1145/2940716.2940787, ssrn:2505643; 265 pages; 2014-10-06 → 2016-06-29.

tl;dr → There is peril to display advertising systems, which are mid-sized linkbaitists and newspapers. Paywalls are indicated.

Abstract

Two recent disruptions to the online advertising market are the widespread use of ad-blocking software and proposed restrictions on third-party tracking, trends that are driven largely by consumer concerns over privacy. Both primarily impact display advertising (as opposed to search and native social ads), and affect how retailers reach customers and how content producers earn revenue. It is, however, unclear what the consequences of these trends are. We investigate using anonymized web browsing histories of 14 million individuals, focusing on “retail sessions” in which users visit online sites that sell goods and services. We find that only 3% of retail sessions are initiated by display ads, a figure that is robust to permissive attribution rules and consistent across widely varying market segments. We further estimate the full distribution of how retail sessions are initiated, and find that search advertising is three times more important than display advertising to retailers, and search advertising is itself roughly three times less important than organic web search. Moving to content providers, we find that display ads are shown by 12% of websites, accounting for 32% of their page views; this reliance is concentrated in online publishing (e.g., news outlets) where the rate is 91%. While most consumption is either in the long-tail of websites that do not show ads, or sites like Facebook that show native, first-party ads, moderately sized web publishers account for a substantial fraction of consumption, and we argue that they will be most affected by changes in the display advertising market. Finally, we use estimates of ad rates to judge the feasibility of replacing lost ad revenue with a freemium or donation-based model.

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