Tobias Kircher - Ban third-party tracking?

In my research I investigate the overarching research question of how data privacy should be regulated in the digital age. Public policymakers currently are contemplating strengthening privacy regulation by completely banning targeted ads. However, privacy regulation cuts the advertising revenues by advertising-supported firms operating in the creative part of the digital economy and, in turn, potentially causes momentous economic costs for consumers and states and unintended social repercussions for digital education and democracy, which would question that a ban on tracking is the optimal privacy regime.

My research informs public policymakers about whether a ban on targeted advertising comes with momentous economic and social costs, allowing them to weigh different privacy regimes against each other. To inform public policymakers, I evaluate what would be the economic and social consequences of banning targeted advertising. To answer my research questions, I combine methods from econometrics and machine learning.

One result of my research is that many mobile apps would not exist without the possibility of targeted advertising. Taken together, my research has far-reaching implications for policymakers and firms. Privacy deprives consumers of crucial benefits of digital goods – product variety and free of charge consumption. Consumers pay a heavy price for privacy. States forego tax revenues. The monetization- and effort-related reactions by firms hinder children’s access to digital education, causing inequity in app-based education and hampering the effectiveness of YouTube-based education aimed for toddlers and preschoolers. These unintended social consequences of privacy regulation should be addressed and cushioned. Advertising-supported firms ought to gear up for the privacy-first world. Platform firms need to set priorities in terms of user privacy and third-party innovation.

Job Market Paper

Kircher, T., Foerderer, J. (2023): "Does Privacy Undermine Content Provision and Consumption? Evidence from Educational YouTube Channels"

A pivotal apprehension surrounding the regulation of privacy lies in its potential to undermine the provision and consumption of digital content. We investigate in a difference-in-differences study the content provision and consumption consequences of Google’s 2020 ban on targeted advertising in child-directed educational YouTube videos, which ensued the settlement of COPPA violations on YouTube. We compare affected child-directed educational YouTube channels with educational YouTube channels not directed to children. Our comprehensive inquiry unearths a sweeping verdict: The ban substantially curtailed the provision of child-directed content. On average, the ban brought about a decline in the number of minutes of video content uploaded by -18.0%. On the demand-side, children sought refuge in surviving channels. However, adverse cross- and intra-category spillover effects led to a fall in viewership of favored niche and high-quality channels, and the policy change precipitated a deterioration of the perceived video quality. Subsequent tests substantiate the cardinal role of revenues from targeted advertising, while concurrently affirming ceased content provision and scaled-back content creation efforts. The convergence of the consequences, resulting from the scaled-back content creation efforts and the spillover to lower-quality channels, significantly degraded the quality of the content being watched. These findings advance our understanding of the downstream consequences of privacy regulation and the determinants of digital content provision, and confront public policymakers with unforeseen social consequences. Privacy regulations undermine the quality and accessibility of niche and preschool educational content on YouTube, which have limited alternatives and stand out as indispensable advantages of low-threshold YouTube-based education.

Publications

Kircher, T., Foerderer, J. (2022): “Ban Targeted Advertising? An Empirical Investigation of the Consequences for App Development”, Management Science, Ahead of Print [Link]

On many multi-sided app platforms, the supply-side monetizes their work with targeted advertising. The targeting of ads has raised concerns over user privacy and has led to calls for platform firms and regulators to bar this practice. Important for this debate is to understand the consequences that a ban on targeted advertising would have for app development. To shed light on the actual consequences of such a ban, we exploit that Google, in 2019, banned targeted advertising in Android children’s games. This setting represents an ideal real-world laboratory and permits a quasi-experimental research design. Our overall finding is that the ban caused substantial app abandonment. The ban reduced the release of feature updates, particularly for games of young, undiversified, and advertisement-dependent firms. All games experienced a decline in app development, except games of exceptionally high quality and demand, which actually showed an increase in development. Corroborating this picture, games banned from targeted advertising were more likely to be delisted. Developers shifted their efforts toward their unaffected games and released fewer new games, on average. Further tests substantiate that targeted advertising represented a crucial form of monetization for these games, and that the ban obliterated ad revenues used for app development. These results advance our understanding of the conflict between user privacy and app development and of the importance of targeted advertising for mobile app platforms. In light of the considerable decline in app development, our study informs mobile platform firms about the drawback of banning targeted advertising. Mobile platform firms might consider measures to reduce the burden on app developers arising from the loss in ad revenues when strengthening user privacy, for instance offering alternative monetization opportunities.

Kircher, T., Foerderer, J. (2021): “Does EU-Consumer Privacy Harm Financing of US-App-Startups? Within-US Evidence of Cross-EU-Effects”, ICIS [Link]

One essential concern regarding consumer privacy regulation is that it harms the business model of app startups, an integral group of B2C startups. Yet, little is known so far about consumer privacy’s consequences on app startups, mostly US-based. We seek to contribute with an empirical study that assesses the consequences of GDPR on two key outcomes of app startups, namely their ability to secure venture capital financing and their survival. We report the results of a difference-in-differences study, comparing affected US-app-startups with unaffected US-control-startups. We observe that GDPR reduced the financing of US-app-startups and increased the likelihood of their closure. Our results advance our understanding of consumer privacy’s impact on the performance of digital consumer products producers, shed light on privacy’s economic costs to previously neglected US-based firms and draw attention to GDPR’s geographic spillovers. Our findings inform policymakers striking a balance between consumer privacy and innovation.

Working Papers

Social Disadvantages of Privacy? Its Convergent Consequences for the Access to App-based Education

Privacy regulations have the potential to inadvertently hinder access to app-based education for non-paying users. This could occur through two adaptation reactions—the erection of paywalls or the escalation of the frequency of advertisements—that have convergent consequences for access. Whether privacy regulation deprives learners of their free of charge access to education apps and of time spent on actually learning has remained obscure, as well as privacy’s social disadvantages in general. To inform public policymakers, we study in a difference-in-differences analysis the access and quality consequences of Apple’s 2019 ban on targeted advertising in child-directed education apps. We find that the ban, on average, reduced the likelihood that a child-directed education app is free by 1.7 percent. In apps remaining free of charge, the perceived app quality declined. The degraded app quality can be attributed to the escalation of the ad frequency causing distraction. Both the reduction in free access and the degradation of app quality were driven by high-quality apps. Learners with special educational needs were exposed to an increasing number of ads as well. These findings push forward the frontiers of knowledge of the consequences of privacy regulation and the pricing consequences of the regulation of the digital economy. In light of the disadvantaged position of underprivileged learners resulting from privacy regulation, it is imperative for public policymakers to consider counteractions. Firms could increase the perceived quality of their products, which is a critical success factor in the digital economy, by relinquishing advertisements.

Does Information Privacy Undermine Journalistic Digital Content?

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