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1 1 (March 6, 2020)

handle is hein.crs/govcaop0001 and id is 1 raw text is: FF. ' -iE S .r , i , March 6, 2020 How Consumer Data Affects Competition Through Digital Advertising Control of internet users' personal data has become a widespread concern. Data-protection legislation has been implemented by states (e.g., the California Consumer Privacy Act) and other countries (e.g., the European Union's General Data Protection Legislation). Two bills introduced in the 116th Congress (S. 2637, S. 1578) would establish a national system through which individuals could request that their internet activity not be tracked. In addition to privacy implications, the collection of consumer data may affect competition among advertisers and among websites and apps that rely on digital ads as a source of revenue. This CRS product focuses on the competitive implications of the collection of large amounts of consumer data in digital advertising. As Congress considers legislation related to consumer data collection, there may be potential competitive effects to consider. Digital advertising allows advertisers to send targeted ads, so that different users viewing the same website or app at the same moment may see different ads. To determine which ad each user receives, advertisers and operators of websites and apps can use software known as ad tools. Advertisers use these tools to place automated bids in a marketplace that runs an instantaneous auction. Advertisers identify their target audience based on demographics, past content views, and other factors. They also indicate the level of exposure they want to achieve and the amount they are willing to bid. Websites and apps use ad tools to offer ad spaces places where ads may be displayed in the marketplace, with information about the user currently viewing the page. The user sees the ad chosen by the marketplace, selected based on the advertiser's bid and the relevance of the ad to the user. Ads receive higher relevance scores when they receive positive feedback, such as users clicking on the ad, whereas ads that trigger fewer responses receive lower scores. Advertisers, as well as operators of websites and apps, have incentives to improve the targeting of ads by collecting detailed information about each user. Advertisers expect more precise targeting to increase user response. Websites' revenue may depend on how frequently users click on the ad or how much time is spent viewing the ad. For example, an advertiser of baby toys may want to present ads to users who have recently searched for diapers online, as they may be more likely to purchase baby toys. A website interested in displaying the ad would want to collect information on its users' search histories to identify those who have recently searched for diapers, as they may be more likely to click on the ad. By using targeted ads, websites and apps may have an advantage over other forms of media that cannot target ads to individuals, such as magazines, radio, and broadcast networks. According to eMarketer, in the United States digital ad spending made up more than half of total ad spending in 2019 and is expected to make up about two- thirds of total ad spending by 2023 (Figure 1). Revenue from digital ads has been increasing over the last two decades. Much of the growth in recent years has come from advertising on mobile devices. Figure I. Estimates and Forecasts of U.S. Digital Ad Spending ($ in billions) R Digital ad spending , \ change % ol total media ad spending Source: eMarketer, February 2019. Note: % change reflects the year-on-year increase in digital ad spending. Estimates include advertising that appears on desktop and laptop computers as well as mobile phones, tablets, and other internet-connect devices; includes messaging-based advertising. Although any website or app can have digital ad spaces, most digital advertising revenue is collected by a small number of firms. The IAB Internet Advertising Revenue Report (October 2019) found that, in the second quarter of 2019, 76% of internet advertising revenue was concentrated in the top 10 leading ad-selling companies. According to eMarketer, Google and Facebook jointly received 60% of U.S. digital ad spending in 2018 and 59% in 2019 (Figure 2). Websites and apps can obtain more consumer data by increasing the number of users or by acquiring more information about each user. Increasing the number of users potentially creates more ad spaces to sell to advertisers. Acquiring more information on each user can improve ad targeting, particularly if the website operator is able to K~:> p\w gnom ggmm mppm qq\ a , q 'S I 11\111WILiN,

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