What is a Cookie Worth?



Tracking a user’s online browsing behavior to target her with relevant ads has become pervasive. There is an ongoing debate about the value of such tracking and the associated loss of privacy experienced by users. We inform this debate by quantifying the value of using different kinds of potentially privacy-intrusive information in targeted advertising. We find that using increasingly privacy-intrusive information increases the accuracy of prediction of purchases, but at a decreasing rate. We also find that targeted advertising is effective in increasing purchase probability and that this effect increases with the baseline purchase probability of a user. Finally, we simulate different privacy policy regimes by restricting different kinds of user information from being used for targeted advertising and quantify the impact such restrictions have on sales. We find that using privacy-intrusive user information can increase ad effectiveness by over 30% compared to random targeting. Using temporal information such as time spent by a user on an advertiser’s website and time period since last visit increase ad effectiveness by over 20%. Other privacy-intrusive information, such as time spent on different types of product pages or number of unique products searched do not increase ad effectiveness significantly.

Rahul Telang is Professor of Information Systems and Management at the Heinz College, Carnegie Mellon University. He also holds a courtesy appointment at the Tepper School of Business. He received his PhD from the Tepper School of Business. Prof Telang’s key research interests are in economics of digitization with particular focus on copyright and intellectual property, and in information security and privacy.  His work has appeared in many top journals and conferences, and has received funding from NSF, NSA and many industry partners. He holds senior editorial position in many top journals. He co-directs a large center called IDEA (Initiative for Digital Entertainment Analytics) which studies the issue of technology and copyrights.