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Estimating the Value of Retargeting in the Online Advertising Market

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  • Fang, Yuhan
  • Kawaguchi, Kohei

Abstract

In response to growing privacy concerns, many browsers have implemented restrictions on third-party cookies and cross-site tracking in online advertising. Advertisers are concerned that such retargeting prohibition policies could lead to a reduction in ads' click probability, thereby affecting the bid values. This paper investigates the economic consequences of prohibiting retargeting in online advertising by analyzing data from a demand-side platform (DSP). Our analysis shows that the DSP's bid values for non-retargeted impressions on Google Chrome are more than 60\% lower than those for retargeted impressions. Yet this difference understates the true disparity in bid values, as retargeting status is observable only for internal auction winners. By modeling the internal auction process and estimating advertisers' valuations, we identify even larger differences between retargeted and non-retargeted impressions: 76.04% for Android and 71.40% for Windows. Our counterfactual simulations indicate that a complete ban on retargeting would substantially reduce expected bid values—by 30.06% for Android and 49.84% for Windows users. These results underscore the significant economic tradeoff between enhancing privacy protection and maintaining advertising market efficiency.

Suggested Citation

  • Fang, Yuhan & Kawaguchi, Kohei, 2025. "Estimating the Value of Retargeting in the Online Advertising Market," SocArXiv j34t8_v3, Center for Open Science.
    • Handle: RePEc:osf:socarx:j34t8_v3
    DOI: 10.31219/osf.io/j34t8_v3
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