New Report Finds Ban on Targeted Advertising Will Deepen Digital Divide in Europe

16 September 2021, Brussels, Belgium – A ban on targeted advertising would have a host of unintended consequences and hinder Europe’s efforts at creating a digital space fit for the future, finds a new report published today.

As the European Parliament prepares to consider amendments to the draft Digital Services Act, the paper, The wider socio-economic and cultural value of targeted advertising in Europe, demonstrates that a blanket ban – as proposed by some MEPs – would damage Europe’s media, SMEs, culture, and global position.

Authored by Dr. Daniel Knapp, Chief Economist for IAB Europe, the study highlights how advertising is a critical pillar of a free and open internet and that in order for online content and service providers to grow advertising revenue, targeting is essential. Over two-thirds of digital advertising revenues in Europe depend on behavioural targeting and advertisers pay on average 2.68 times more for ads targeted this way.

The report also finds that targeted advertising is increasingly important for European publishers as they transition to digital-first business models and that any ban would deepen the digital divide between European citizens who have the financial means to pay for quality news and those that don’t.

Dr. Knapp’s analysis also shows that targeted advertising is particularly important for Europe’s SMEs, many of whom were forced to shift to digital-only marketing strategies by COVID-19 restrictions, and who simply don’t have the budgets to pay for ads geared to general audiences, rather than tailored to those who are most likely to be interested in their products and services.

Business Director of Portuguese online content and services provider SAPO, Fernando Parreira said:

The recent digital boom is a strong signal that Europe’s future lies in technology and innovation. But policymakers are at a crossroads. They face a choice between creating a strong framework that allows all businesses to flourish at the forefront of digital competitiveness or seeing Europe fall behind its global competitors.  Europe’s economy needs small, agile companies with access to a range of innovative tools, such as targeted advertising, to allow them to compete and help secure a prosperous digital economy.

Paweł Kopacki, a Director at Polish digital publisher Wirtualna Polska continued:

The past year has shown that digital advertising is not only vital to the European economy but has a larger social and cultural value that is often overlooked and not accounted for in conventional statistics. It supports a pluralistic media landscape, provides a critical marketing channel for SMEs, is intertwined with the promotion and protection of European culture, and provides a growth engine for European champions, allowing them to diversify their customer base through advertising. 

Shedding light on the real-life importance of advertising revenues, Director of EU Policy and Head of Brussels Office of Developers Alliance, Karina Stan stated:

Targeted advertising is a critical tool for developers and startups to stand out in a highly competitive market. The potential banning of targeted advertising is another example of Brussels hobbling European innovation and putting the continent at a disadvantage in the global race to succeed in the digital economy. This is something Europe simply cannot afford and we urge policymakers in Brussels not to implement such a blunt and potentially damaging proposal.

Secretary General of the European Enterprise Alliance, Damir Filipovic added:

Targeted advertising not only supports thousands of small and medium businesses to advertise their products to new customers but plays a critical role in keeping the digital economy accessible for all. Dr Knapp’s report clearly lays out the benefits of targeted advertising, alongside the risks of a ban which would create significant obstacles to European economies struggling to recover from the pandemic.

Reflecting on the EU policymaker discussions, Tamara Daltroff, Director General of the European Association of Communications Agencies, said:

The current debate too often disregards the positive social and economic impact of targeted advertising. It is a valuable technique that is not only used by big advertisers, but also by small companies, start-ups, NGOs – and not least the free media. Personalisation that respects privacy is the key building block of any successful campaign – and the GDPR remains our guiding compass here.

IAB Europe CEO Townsend Feehan commented:

We fully support the elements in the DSA proposal that are genuinely additive and complementary to the EU’s highly restrictive privacy and data protection legal framework. These would include new mandatory information disclosures about the identity of the advertiser, who may not always be a controller for a specific instance of data processing and as a result would not need to be disclosed under the GDPR.  But first and foremost, the European Parliament should look at what can be done to strengthen compliance and enforcement with existing law before laying on new proposals that overlap and have not been subject to any kind of impact assessment and, as this report shows, could have devastating consequences for a range of sectors.

IAB Europe is hosting a webinar on the 16th September at 12pm CEST where Daniel Knapp will discuss his paper and the challenges it elucidates as part of IAB Europe’s Trust and Transparency Series. It will be live-streamed at the following link and is open to all.

 

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