Policy Prototyping project

The Effects of Restricting
Targeted Advertising
for Startups

Startups Policy Prototyping the Repercussions
of Restricting Targeted Advertising

Startups in Europe are investing in new digital tools and competencies faster than ever before to meet European buying habits and compete in the global market.

Targeted advertising is one of the most important tools in the startup growth cycle to validate business ideas, reach critical masses and scale operations beyond local markets. Restrictions on targeted ads would disproportionately hurt the European startup ecosystem by hindering expansion possibilities and disadvantage startups in the global competition.

Europe should be the leader in fostering innovation, empowering entrepreneurs and supporting our startups, which Europe is built upon. 
Policy Prototyping brings evidence-based recommendations and voices from the startup to policy-making processes. With the project, we want to close the gap between policy-makers and startups and find common ground in the legislation making.

Targeted advertising is vital for startups

To start a business

Targeted ads can be used to validate a business idea to see if there is a market for a service/product.

To strengthen

Targeted ads can be used to secure a critical mass of customers which is core for building a competitive business model and receive investment.

To scale

Targeted ads is a tool to find relevant markets and expand efficiently e.g. by finding the right cost per acquisition (CPA).

To find the right customers

Targeted ads are an efficient way of securing innovative products reaching the right and most potential buyer.

Targeted advertising performed better

in delivering new and returning customers to websites.

Targeted ads outperformed contextual ads by an average of +162% in terms of driving new or returning customers to the case brand’s websites based on click-through rate.*

cases by attracting more clicks on targeted campaigns.

Targeted ads delivered a higher rate of clicks on digital ads whilst remaining lower on the cost compared to contextual ads.

Contextual ads resulted in a price increase

cases by attracting more clicks on targeted campaigns.

Contextual ads resulted in an increase of +104% in prices (Cost per Click*) for getting new or returning customers to click the campaign ads compared to targeted ads.

Startups rely on data to serve customers, 
build brands and innovate

Not using personalised, targeted ads will take Virta back to the stone age. We create ads based on user characteristics such as the audience’s online behavior, location and demographics and with the data, we provide qualified leads to our sales team. This way, we can reduce budget wastage and only use money for marketing, when it’s backed up with data. We would not even know where to start with contextual ads.

Samuli Ahola, Director of Digital Sales, Virta

All of our marketing efforts are based on data. Restrictions on targeted advertising would immediately affect Fonum’s sales and reflect badly on our brand. I see targeted advertising as an important part of customer service and advertising without data would mean bad customer service, poorer brand image and fewer euros for us, putting it bluntly. If our customer acquisition cost would increase, we would stop buying ads and find another way - perhaps through influences, who’s audiences’ behaviour we understand. Take the bigger digital service-platforms out of the equation, new ones will always emerge

Ida Nevala, Marketing Communications Manager, Fonum

From my perspective, contextual ads can never substitute for targeted ads. The sudden IoS 14 update shook our operations and startups had no chance to prepare. As an established scale-up, we rely tremendously on targeted ads and the data we receive from the platforms in return. The data allows us to innovate, expand to new markets and serve our audiences better.

Michael Ewald Hansen, Ecommerce Director, Lakrids by Bülow

We call the EU policy-makers to...

Invite startups to the policy discussions
to find balanced regulative frameworks which will encourage entrepreneurship and prepare startups better with ongoing dialogue and tools. The dialogue could be had within informal coalitions or committees which can advice policy makers on the topics concerning startups.
Build clear legislative frameworks for the future
which do not overlap with existing legislation (such as GDPR) and resulting in adding pressure on startups who are not equipped to absorb complex digital regulative patchworks.
Provide easy access to users to redress the use of their personal data
and keep the European online spaces functional, user-friendly and competitive, in addition to users’ right to redress the use of their data. The common ground should be found together with the citizens whose data is used. The restriction should not be formed by stakeholders in the extreme ends of the issue.
Evaluate the consequences of banning targeted advertising
to understand the repercussions for small businesses and ensure potential regulation solves the right problem. Policy-makers should strive to clarify the definition and scope of any regulations and ensure it does not create harmful effects for startups without truly improving user experience.



The Policy Prototyping tests were conducted with the six Nordic startups, who tested two forms of advertising and gave the data for the purpose of comparing contextual and targeted advertising in real life conditions.
Targeting Startups

Johann Svane Jensen, Coordinator