“Money makes the world go round, the world go round, the world go round…”
For web publishers – from news to email to search engines to LOLcats – that money comes from ads. And what makes ads worth paying for? Relevance.
That’s what cookies do: they let advertisers reach users who are more likely to care about their message. Cookies allow “third party” ad networks to create profiles of interests inferred from online browsing. How much more relevant/profitable does this make ads?
A lot, says a new study from economists Jeff Eisenach & Howard Beales:
advertisers place significantly greater value on users for whom more information is available… [C]ookies … increase the observed exchange transaction price by at least 60 percent relative to the average price (for users with “new” cookies), and by as much as 200 percent (for users with longer-lived cookies). … [E]ven the largest publishers rely on third-party technology models to serve approximately half of their advertising impressions, while “long-tail” publishers rely upon third-party technology models for up to two thirds of their advertising volumes.