Wednesday, July 8, 2020
The Value of Personal Data in Internet Commerce: A High-Stake Field Experiment on Data Regulation Policy
Tianshu Sun, University of Southern California - Marshall School of Business, Zhe Yuan, Alibaba Group, Chunxiao Li, Alibaba Group, Kaifu Zhang, Alibaba Group, Jun Xu, Alibaba Group offer The Value of Personal Data in Internet Commerce: A High-Stake Field Experiment on Data Regulation Policy.
ABSTRACT: Personal data has become a key input in Internet Commerce, facilitating the matching between millions of customers and merchants. Recent data regulations in China, Europe and US restricts Internet platforms' ability to collect and use personal data for personalized recommendation and may fundamentally impact Internet Commerce. In collaboration with the world's largest E-commerce platform, we conduct a large-scale field experiment to measure the potential impact of data regulation policy, and to understand the value of personal data in Internet Commerce. For a random subset of 555,800 customers on Alibaba platform, we simulate the regulation by banning the use of personal data in the homepage recommendation algorithm and record the matching process and outcomes between these customers and merchants. Compared to the control group with personal data, we observe a significant higher concentration in the algorithmic recommendation of products in the treatment group and a very sharp decrease in the matching outcomes as measured by both customer engagement (clickthrough rate and product browsing) and market transaction (GMV). The negative effect is disproportionate and more pronounced for niche merchants and customers who would benefit most from E-commerce. We discuss the economic impact of data regulation on Internet Commerce, as well as the role of personal data in generating value and fostering innovations.