"If you remove tracking, you remove advertisers." "Stop [data] sharing and you put a stop to the Internet as we know it." "Thousands of small websites may disappear." "Would you like to pay $20 a month for Facebook?" A spate of such recent commentaries have speculated that Do Not Track could hobble advertising-supported businesses. Here's why it won't.
Do Not Track would only affect a sliver of the online advertising market.
First, a brief overview of online advertising. Suppose you operate a high-end Napa winery and decide to run an ad. You might place your ad on a specific website ("first-party advertising"), or you might arrange your ad with an advertising network that spans thousands of sites ("third-party advertising"). Here's a sample of how you might target your ad:
- Contextual Advertising: Your ad appears on pages about wine.
- Demographic Advertising: Your ad appears on pages whose visitors tend to be wealthy.
- Behavioral Advertising: Your ad appears to users who have viewed a number of pages about wine.1
- Search Advertising: Your ad appears on search result pages for the query "wine."
- Placement Advertising: Your ad appears on particular pages.
- Social Network Advertising: Your ad appears to social network users who have listed "wine" as an interest.
Of these myriad modes of advertising, Do Not Track would only affect one: third-party behavioral advertising, because it incorporates third-party tracking. And that accounted for, at most, just 4% (less than $1B) of 2009 U.S. online advertising expenditures. While the use of third-party behavioral advertising is rapidly growing, so is the online advertising market; projections place behavioral advertising at only 7% of the U.S. online advertising market in 2014 (1, 2).2
Do Not Track would only affect a new segment of the online advertising market.
Not only is third-party behavioral advertising a small piece of the online advertising market, it's also a new piece. Behavioral advertising accounted for a negligible share of online advertising until roughly 2007 (1, 2). Countless ad-supported online businesses launched and thrived before then.
Do Not Track would cap—not eliminate—third-party behavioral advertising.
Do Not Track is an opt-out mechanism; uptake is likely to be far from complete. Two helpful benchmarks: After seven years of a permanent opt out, fewer than half of U.S. phone numbers are on the Do Not Call registry (1, 2). And after four years of availability, fewer than 3% of Firefox users have installed its most popular add-on (1, 2).
Advertisers might not reallocate their ad dollars.
Websites that host third-party ads usually receive a fixed share of revenue; they earn more only if advertisers spend more (e.g. AdSense, DoubleClick). Do Not Track would thus impact advertising revenue only if it caused advertisers to reallocate online ad dollars. But that would happen only if advertisers have a strong preference for third-party behavioral advertising. There's some evidence that advertisers don't: despite the growing availability of third-party behavioral advertising over the past several years, advertisers haven't rushed to adopt it. In fact, U.S. online advertising revenues grew at an average annual rate of only 3.4% between 2007 (when behavioral advertising first caught on) and 2009.3
There's a technology fix: interest-targeted advertising without tracking.
Third-party behavioral advertising incorporates tracking to discover a user's interests. But interest-targeted advertising can be achieved without tracking. Under one alternative model, the web browser learns a user's interests, and then passes those interests to an advertising network. A number of research and commercial efforts do just this, including AdNostic, RePriv, and Google Ads Preferences.
Ad-supported businesses could ask—or possibly require—Do Not Track users to allow third-party behavioral advertising.
Do Not Track is not all-or-nothing; users who have opted out can opt back into third-party tracking on specific sites or with specific trackers. So even if third-party behavioral advertising were an important revenue source for ad-supported businesses, even if enough users opted out to have an impact, even if advertisers were inclined to pull their ad dollars, and even if alternative technologies for interest-targeted advertising weren't available, a business would still have an easy remedy: ask—or possibly require4—visitors to disable Do Not Track on the site. The proposal is about increasing privacy choice and transparency, not restricting online business practices.
The reports of advertising's death are greatly exaggerated.
 For simplicity this post glosses over behavioral retargeting, a small subset of behavioral advertising.
 These figures reflect both first- and third-party behavioral advertising. They should be taken as an upper limit on the market size for third-party behavioral advertising.
 One possible reason: behavioral ads may be only a marginally better deal for advertisers. In Q4 2009, a behavioral ad was 2.1x as effective as the average online ad—but it cost 2x as much (1).
 Some regulatory proposals have called for disallowing such "tiered" access.
Many thanks to Arvind Narayanan for endless patience in reviewing drafts. All views are my own.