Mobile Apps and Targeted Advertising : Competitive Effects of Data Exchange

This paper studies how restricting data exchange between firms affects market competition in the app economy. The identification exploits iOS's privacy policy update, which limits apps from tracking users across other apps using identifiers. We find that the iOS update reduces startup app entries by 6.5% and incumbents' average number of version updates by 2.9%. Furthermore, large apps experience larger declines in revenue and the number of new downloads than small apps. Our empirical findings suggest that restricting data exchange reduces large apps' competitive advantage. However, market competition may fall in the long run due to the presence of fewer entrants and more inactive apps