Estimate of US revenue loss if Congress mandated Opt-In for interest-based ads

American websites would lose $33 Billion over 5 years if Congress mandated EU-style Opt-In consent for interest-based advertising.

“Our analysis suggests that after the Privacy Directive was passed, advertising effectiveness decreased on average by around 65 percent in Europe relative to the rest of the world”

The MIT-Toronto Study compared the purchase intentions of 3.3 million individuals across 5 EU and 5 non-EU countries over the 8 years after European nations began implementing opt-in requirements to follow the EU Privacy Directive.  The comprehensive study reduced extraneous factors revealing the advertising effects of the EU opt-in Privacy Directive.

Building off the work in the MIT-Toronto study, we forecast the effect such an EU-style opt-in legislation on American websites.  Our forecast identified an $33 billion loss to American websites over five years.

This Graph shows the revenue losses would have serious consequences for websites and consumers, too:

• Websites will show more ads to make up some of the revenue loss.
• Websites will have less to spend on content, services, and innovation.
• Some websites will erect pay walls for content that users get for free today.

Graph of Opt-In mandate for interest-based advertising

Our numbers are based upon taking a forecast of US online interest-based ad revenue, then reducing that by the decline in advertising effectiveness experienced in the EU.

Sources:

1.  The loss of advertising revenue found in the EU after Opt-In was mandated there, by Goldfarb & Tucker, Privacy Regulation and Online Advertising, Univ. Toronto & MIT (Aug. 5, 2010)

2.  Interest-based ad revenue starts at 80% of 2010 total online ad revenue,  IAB, $6.4 Billion in Q3 2010 Sets New Record for Internet Advertising Revenues (Dec. 2010)

3.  Growth rates were based on research by d Nicole Perrin, 11 Trends for 2011, eMarketer (Dec. 2010)

Comments (3):

1. Reply

   House Hearing on Effects of EU Privacy Directive said:
   September 16, 2011 at 9:53 am

   [...] Their study revealed that the directive “reduced advertising performance by 65%.” She cited an estimate based on the study indicating U.S. companies could suffer losses of $33 billion over five years if [...]
2. Reply

   House Hearing on Effects of EU Privacy Directive said:
   September 16, 2011 at 12:00 pm

   [...] companies. Their study suggested that a gauge “reduced promotion opening by 65%.” She cited an estimate formed on a investigate indicating U.S. companies could humour waste of $33 billion over 5 years if [...]
3. Reply

   Giants Standing on NetChoice’s Shoulders to See the Impact of EU Regulations | NetChoice - Breaking down the Barriers to e-Commerce said:
   September 16, 2011 at 3:12 pm

   [...] At a Congressional hearing, academic giants stood on NetChoice’s shoulders to bolster their arguments against the US’s adoption of EU regulations by citing NetChoice’s analysis. [...]