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Cited by 36Digital Platforms and EconomicsConsumer Market Behavior and PricingPrivacy, Security, and Data Protection

Ban Targeted Advertising? An Empirical Investigation of the Consequences for App Development

Kircher, Tobias, Foerderer, Jens·2024·Management Science
DOI 10.1287/mnsc.2023.4726
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Abstract

On many multisided 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 inform, 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 on targeted advertising caused substantial app abandonment. The ban reduced the release of feature updates, particularly for games of young, undiversified, and advertisement-dependent firms. Only games of exceptionally high quality and demand showed an increase in development. Corroborating this picture, affected games 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 affected games and that the ban obliterated ad revenues used for app development. Our findings have several implications. To avoid a loss in app innovation, platform firms should consider implementing measures to reduce the burden on developers, especially by creating alternative monetization opportunities. Consumers and policymakers should be aware that targeted advertising plays a crucial role for app development and can use our estimates for designing policies. Thus, consumers’ demand for privacy can conflict with platform firms’ goal to foster app innovation. This paper was accepted by Hemant Bhargava, information systems. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2023.4726 .

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Authors
Kircher, T., & Foerderer, J.
Affiliations
Technical University of Munich (DE)
ORCID
Venue
Management Science
Publisher
Institute for Operations Research and the Management Sciences (INFORMS)
Published
2024-02
Volume
70
Issue
2
Pages
1070-1092
ISSN
  • 0025-1909 (ISSN-L)
  • 1526-5501
DOI
10.1287/mnsc.2023.4726
OpenAlex
W4377095343
Cited by
36
References
80
Citations by year
2026: 10 · 2025: 18 · 2024: 4 · 2023: 3 · 2019: 1
FWCI
7.55
Type
journal article
Language
en
Open access
closed
Locations
  • Management Science (publishedVersion)
  • mediaTUM (Technical University of Munich) (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Strategy and Management › Digital Platforms and Economics
  • Social Sciences › Business, Management and Accounting › Marketing › Consumer Market Behavior and Pricing
  • Social Sciences › Sociology and Political Science › Privacy, Security, and Data Protection
Keywords
targeted advertising, app development, app abandonment, advertising revenue, app monetization, user privacy, platform regulation, Google

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