The Differential Effects of Privacy Protections and Digital Ad Taxes on Publisher and Advertiser Profitability

Abstract

We model an asymmetric ad-network duopoly with heterogeneous publishers and advertisers to assess the effects of data and tracking restrictions on profits. Publishers and advertisers vary in their sizes and preferences towards the two ad networks, and networks differ in terms of the revenues they can deliver to publishers and advertisers. We show that new restrictions that hamper networks' ability to deliver revenues lead to the highest percentage profit declines for small publishers and small advertisers, particularly those who contract with the lower-revenue ad network. We demonstrate that our findings are robust to regulations that differentially impact ad networks and to other market settings.