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Seminar:  What is a Cookie Worth?

Date:March 2, 2015 
Talk Title:What is a Cookie Worth?
Speaker:Rahul Telang
Time & Location:12:00pm - 1:00pm
Panther Hollow Room, CIC Building, Pittsburgh


Recent technological advances have enabled detailed tracking of an individual user’s online browsing and transaction behavior through the use of digital cookies. Marketers now routinely use this information to deliver customized online advertisements to internet users based on their recent browsing history. Advertisers argue that using such information leads to better targeting users with relevant ads at appropriate times resulting in higher sales, making both the consumer and the seller better-off. Privacy advocates, on the other hand, claim that the cost of such privacy intrusion is too high and support strong restriction on such targeting.

We seek to inform this debate by providing empirical evidence that quantifies the value of different types of information that cookies can track and their impact on advertising effectiveness.

We collect detailed anonymous field data on users cookies and their subsequent expose to ads and purchasing. We find that the accuracy of predicting an individual’s purchase probability increases with increasing use of privacy-intrusive information, but at a decreasing rate. Specifically, adding granular temporal information, such as time spent by a user on different kinds of product pages, does not additionally increase the accuracy of predicting their purchase probability. Next, we make a causal estimate of the effect of targeted advertisements on sales. We find that targeted online advertisements increase the probability of purchase of a user by 4% on average and that this effect is increasing with baseline purchase probability. We then perform some policy experiments. In the strictest privacy policy regime, we assume no browsing or transactional history is available to the advertiser while the most lenient privacy policy regime allows the usage of all the privacy intrusive variables. We find that online advertisements are 10% more effective under the lenient privacy policy regime than the strict one.

Speaker Bio

Rahul Telang is a Professor of Information Systems at Carnegie Mellon University. Professor Telang’s research interest lies in two major domains. First is on Digital Media Industry with a particular focus on digitization of songs, movies, TV and books is affecting the incentives of content provider, content distributors as well public policy challenges in terms of innovation and copyright. In particular, he has examined the issue proliferation of distribution platforms including online piracy and its impact on traditional music, movies and books industry. Recently, he is investigating the role of social networks on music diffusion, technology adoption, and employee job search. Some of his prior work explored the challenges of interaction of multiple platforms (web portals vs telephony for customer service; SMS and voice for cellular phones). He was the recipient of Sloan Foundation Industry Study fellowship for his work in this domain and is a co-director of Digital Media Research Center at the Heinz College. His work is also funded extensively by industry participants including Google.

His second area of work is on economics of information security and privacy. He has examined the issue of vendors’ incentives to improve the quality of their products and role of policy making and standards in changing these incentives. His earlier work explores the challenges of vulnerability disclosure and how competition and policy making affect these patch release decisions. Recently, he is examining the role of data breach disclosure laws on identity thefts. He was the recipient of NSF CAREER award for his work on economics of information security.

Dr. Telang has published extensively in many top journals like Management Science, Marketing Science, Information Systems Research, MIS Quarterly, and Journal of Marketing Research. He is on the editorial board of Management Science and ISR. He has organized many conferences and workshops and many of his papers have received top honors at journals and conferences.