The Impact of Consumer Multi-homing Behavior on Ad Prices: Evidence from an Online Marketplace

Abstract

This study examines the trade-off between online advertising effectiveness and (do-not-track) privacy regulation. Recent literature on ad-financed business model predicts that consumers who patronize multiple platforms (multi-homing) can have less per-impression value as they may see duplicated ads from multiple sources. The use of tracking technology in the digital space may however eliminate the redundant ad provision at the expense of consumer privacy. The presenting paper provides the first empirical evidence on whether multi-homer’s attention is less valuable in online media market, under FTC’s privacy regulation on tracking. The paper then discusses the potential market outcome if the privacy regulation were removed. The publisher ad data is scraped from BuySellAds and matched with comScore 2016 for consumer multihoming behavior. The study employed a quasi-experiment based on ad location in a webpage to identify the multi-homing effect on ad prices. By finding that the marginal effect of multi-homing (treatment) on ad prices is indeed more negative for the more viewable ads (treated), the paper concludes that consumer multi-homing behavior can increase the tendency of over impressions, and such tendency can decrease advertisers’ valuation of ad slots in the digital display ad market.