The Impact of Ad-Blockers on Online Consumer Behavior

Department of Decision Sciences and Managerial Economics

Digital advertising is on track to become the dominant form of advertising, but ad-blocking technologies have recently emerged, posing a potential threat to the online advertising ecosystem. A significant and increasing fraction of internet users has indeed already started employing ad-blockers. However, surprisingly little is known yet about the effects of ad-blockers on consumers. This paper investigates the impact of ad-blockers on online search and purchasing behaviors by empirically analyzing a consumer-level panel data set. Interestingly, the analyses reveal that ad-blockers have a significant effect on online purchasing behavior: online consumer spending decreases due to ad-blockers by approximately $14.2 billion per year in total. In examining the underlying mechanism of the ad-blocker effects, I find that ad-blockers significantly decrease spending for brands that consumers have not experienced before, partially shifting spending toward brands that they have experienced in the past. I also find that ad-blockers spur additional unintended consequences, as they reduce consumers’ search activities across information channels. The findings remain robust to different identifying assumptions and robustness checks. The analyses draw timely managerial and policy implications for the digital advertising industry, as well as additional insights into the role of online advertising.