Businesses of all sizes use personalized digital ads to help drive sales and revenue, find new customers, and keep current ones by delivering relevant and engaging experiences online. With an increasing number of US states looking to limit the types of data that businesses collect and use to advertise to consumers, Advertiser Perceptions partnered with the Connected Commerce Council and Google to better understand how restrictions on personalization and data usage in digital advertising could impact businesses across the US.
American businesses use data in digital advertising to help reach people who would be more likely to buy their products or services, and to understand and improve how better to use their limited budgets to drive valuable business outcomes, like purchases on their websites. Personalized information could include things such as language, time of day, the state you live in, things you might be interested in, and other audience attributes. It can also include information that companies have collected directly from or about their customers, such as logged-in user information tied to email addresses.
To better understand how personalized digital ads support US businesses, including local and national advertisers and publishers, we surveyed more than 1,600 US SMBs, large advertisers and publishers between March and April 2024. [You can download the complete findings here or at the bottom of this blog post.] We found US businesses believe that personalized digital ads are an important driver of sales and revenue, and that losing the ability to use data to reach audiences with personalized digital ads or measure their success would have a negative impact on their businesses.
The Benefits of Personalized Digital Ads
US businesses rely on personalized digital ads to reach the right audiences, which has important downstream benefits. Some of the most commonly cited benefits of using personalized digital ads we found in the study included:
- Greater advertising return on investment compared to non-personalized forms of advertising. While non-personalized digital ad placements and traditional media often rely largely on contextual cues such as content, theme, or topic, personalized digital ads offer businesses the ability to reach audiences based on a more refined understanding of who that audience is based on interests, past purchases, or known customer information. With an approach driven more directly by audience data, businesses of all types generally see fewer advertising dollars wasted and have an easier time measuring the impact of their campaigns.
- Increased revenue and profitability. This research found the majority of US publishers and advertisers can attribute a healthy portion of their overall revenue to the use of personalized digital ads. US publishers estimated an average of 37% of their total digital ad revenue in 2023 came from personalized ads, with all large publishers surveyed (100%) reporting positive impacts from personalized ads.
- A better consumer experience. While personalized advertising is sometimes linked to discussions of data privacy in the US, there are also benefits to consumers and their experiences online. Having accurate information on consumer interests and behaviors—and doing this in a way that prioritizes user privacy and control—makes for a more relevant, respectful and less frustrating user experience.
The Impact of Limiting the Use of Personalized Digital Ads
Already this year, states such as Kentucky, Maryland, Nebraska, New Hampshire, and New Jersey have joined numerous others in enacting data privacy laws designed to limit the ways businesses can collect and use information about consumers. Many of these laws focus on the proper consent, collection, storage, and use of personal data for business practices, but each is slightly different. While some are explicit about the types of consumer data that businesses can collect, others offer few guidelines. Some apply to all businesses, whereas others apply only to businesses of a certain size or with a select number of customer records.
It’s a complicated and continually changing landscape of dos and don’ts that businesses and publishers will have to abide by in the absence of preemptive federal standards.
For advertisers and publishers, these put limits and guardrails around the types of data used to personalize digital ads and website experiences. As those limits grow, advertisers and publishers anticipate shrinking returns on advertising spend and overall revenue, as well business impacts that could have a much larger effect on the economy.
SMBs are likely to face the most acute impacts. Given their limited advertising budgets, SMBs generally rely more heavily on digital advertising channels such as search, display and paid social to advertise their products and reach new customers. As such, these businesses are susceptible to even greater impacts should the use of personalized digital ads be restricted. Like larger advertisers and publishers, SMBs would see revenue and sales impacts. But they would also have a harder time competing for market share and reaching new customers if their ability to more accurately reach the audiences that matter were restricted.
Our study also looked at the impacts of restricting the data necessary for personalized digital ads and the measurement of their success on a state-by-state level to understand where limiting the use of data for personalized advertising or digital ad measurement would have the greatest effects. For example, half of Florida SMBs would have to raise prices without the use of personalized ads, and more than one-third would need to lay off staff or close down. In Minnesota, more than two-thirds would have to raise prices and 40% would have to lay off staff or close down without the ability to use personalized digital ads. In Ohio, 85% of SMBs would have to adjust their sales strategies without personalized digital ads. And in Texas, 34% of SMBs say revenue and sales would drop in the event they could not use personalized digital ads.
Among large national advertisers, one in five say they would lose significant revenue without the use of personalized digital ads, with nearly half also saying that banning personalized ads would cripple their customer acquisition efforts. But the effects of limiting the use of personalized digital ads also would have downstream impacts on consumers and employees: two-thirds say they would have to raise prices without the use of personalized digital ads, and a quarter would be forced to lay off staff.
US publishers anticipate a more acute impact to their businesses should personalized digital ads be banned. More than 60% of large publishers warned that banning personalized ads would negatively impact their revenue, ad sales, and overall business. Specifically, banning personalized ads would cost 65% of US publishers over a quarter of their annual revenues. In order to recoup lost ad revenues, US publishers would have to add paywalls or increase the number of ads they serve. Forty-five percent of small publishers would implement paywalls or move to subscription models if personalized ads were banned, and 68% of small publishers would increase the number of ads they show to consumers if personalized ads were banned.
All of these changes and adjustments will have serious implications for consumers. For one, increased business costs will inevitably be passed on to consumers, who would be forced to pay more for goods and services. Consumers are also likely to see less choice in products and services as businesses are forced to cut back their portfolios and offerings. And fewer content options are another real implication of banning personalized digital ads, as publishers will inevitably be forced to erect paywalls or charge for their content in other ways.
The Bottom Line
A clear federal standard that puts publishers, advertisers and consumers on a level playing field nationwide, with a proper balance between the interests of all parties, is needed. Such a standard will serve consumers’ interest in transparency and control over how their data is used and provide a framework for personalized digital advertising to continue benefiting them along with advertisers and publishers—without unnecessarily harming the same parties through overregulation.
To download a copy of this research, click here.
About the Research
In partnership with the Connected Commerce Council and Google, Advertiser Perceptions surveyed 1,200 SMBs, 210 large advertisers, and 200 publishers in March-April 2024 to understand the value of personalized digital advertising to their organization. SMBs included businesses with fewer than 500 employees, while large advertisers included businesses with at least 500 employees. Publishers included companies with ad-supported digital sites or apps that get at least 3 million unique monthly visitors. All respondents were involved in decision-making about digital ads and used personalized advertising.
