Evaluating the Impact of Privacy Regulation on E-Commerce Firms: Evidence from Apple's App Tracking Transparency

Assembling novel datasets on online advertiser spending, performance, and revenue, we quantify the economic effects of Apple's App Tracking Transparency (ATT) privacy policy on e-commerce firms. We find that conversion-optimized Meta advertisements, affected most by ATT, saw a 37% reduction in click-through rates after ATT. While firms responded by shifting ad spend from Meta to the Google ecosystem, firms with higher baseline Meta dependence nevertheless experienced a substantial decline in firm-wide revenue relative to firms with lower baseline Meta dependence. We quantify these effects using a variety of methods, finding revenue decreases in the range between 8-40% relative to less exposed firms. These declines were primarily borne by smaller e-commerce firms, raising questions about the trade-offs between consumer privacy and the ability of smaller e-commerce and direct-to-consumer firms to succeed in the product market.