The economics of advertising and privacy

Abstract

One of the new realities of advertising is that personal information can be used to ensure that advertising is only shown and designed for a select group of consumers who stand to gain most from this information. However, to gather the data used for targeting requires some degree of privacy intrusion by advertisers. This sets up a tradeoff between the informativeness of advertising and the degree of privacy intrusion. This paper summarizes recent empirical research that illuminates this tradeoff.

The Economics of Privacy

“…With evolving data mining and analytics tools being applied to expanding sets of personal data (the so called "big data" phenomenon) and with new technologiesfrom facial recognition to smart thermostats, from activity and health trackers to the Internet of Things-the portions of our personal and professional lives that are not monitored and quantified are further reduced. On the one hand, granular personal data may be used to provide even more precisely targeted services and to ensure that advertising is shown only to those consumers who stand to gain most from it (Tucker 2012). On the other, opportunities for abuse may abound.…”

Unraveling the Personalization Paradox: The Effect of Information Collection and Trust-Building Strategies on Online Advertisement Effectiveness

“…Yet consumers may experience discomfort when they receive personalized advertisements (Tucker 2012), because it prompts them to realize their information has been collected without their consent. For example, when the U.S. retailer Urban Outfitters launched a website that personalized each customer's experience by gender, customers instantly recognized the personalization and confronted the clear knowledge that the retailer had collected their information without their awareness.…”

Follow the Money: Online Piracy and Self-Regulation in the Advertising Industry

“…The literature on the economics of online advertising and consumer tracking has been steadily growing (see Tucker, 2012, Goldfarb, 2014and Peitz and Reisinger, 2015 at the problem of a monopoly publisher that can decide on whether to install a tracking service. In their model, the tracking service enables advertisers to charge higher prices on the product market.…”

“…Maxwell et al, 2000;Egorov and Harstad, 2017). Second, we contribute to the literature on the economics of online advertising, tracking and privacy (see Tucker, 2012;Goldfarb, 2014;Peitz and Reisinger, 2015 for summaries). Third, we add to the growing literature that evaluates IP enforcement policies (Adermon and Liang, 2014;Reimers, 2016;Peukert et al, 2017;Aguiar et al, 2017).…”