The Value of Personal Data in Internet Commerce: A High-Stakes Field Experiment on Data Regulation Policy

Abstract

Personal data have become a key input in internet commerce, facilitating the matching between millions of customers and merchants. Recent data regulations in China, Europe, and the United States restrict internet platforms’ ability to collect and use personal data for personalized recommendation and may fundamentally impact internet commerce. In collaboration with the largest e-commerce platform in China, we conduct a large-scale field experiment to measure the potential impact of data regulation policy and to understand the value of personal data in internet commerce. For a random subset of 555,800 customers on the Alibaba platform, we simulate the regulation by banning the use of personal data in the home page recommendation algorithm and record the matching process and outcomes between these customers and merchants. Compared with the control group with personal data, we observe a significantly higher concentration in the algorithmic recommendation of products in the treatment group and a very sharp decrease in the matching outcomes as measured by both customer engagement (click-through rate and product browsing) and market transaction (sales volume and amount). The negative effect is disproportionate and more pronounced for niche merchants and customers who would benefit more from e-commerce. We discuss the potential economic impact of data regulation on internet commerce as well as the role of personal data in generating value and fostering long-tail innovations. This paper was accepted by Chris Forman, information system. Funding: Z. Yuan wants to acknowledge financial support from NSFC [Grants 72203202, 72192803 and 72141305]. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4828 .