In recent years, increasingly sophisticated technology has given advertisers the ability to track online behavior and offer ever-more targeted ads to consumers. The change hasn’t gone over well with the public: two-thirds of Americans say they oppose this type of advertising. Politicians such as California governor Gavin Newsom have gone so far as to suggest that consumers’ data is so valuable that they should be paid directly if their data is shared with advertisers.
But new research by Questrom’s Garrett Johnson, University of Colorado – Boulder’s Scott Shriver and University of Rochester’s Shaoyin Du suggests that there is significantly more nuance to the online advertising and privacy debate. Their work found that consumers’ actions indicate that they don’t value online privacy nearly as much as they say, that individual tracking data is likely worth significantly less than most imagine, and that publishers and advertisers will be squeezed by changes to online advertising. “This type of advertising is valuable to publishers, because it can double the amount of ad dollars that they can get,” says Johnson. “But for individuals, it’s a pretty small amount of money.”
To learn more, the trio looked at data from more than 62 million ad impression transactions to study the AdChoices program, which allows consumers to opt out of behaviorally targeted advertising.
They found that despite an overwhelming number of people who said they didn’t want to be behaviorally targeted online, their research suggested that just 0.23 percent of American ad impressions come from users who have opted out of online behavioral advertising. Using an array of modeling techniques, they found that these opt-out users were worth 52 percent less to advertisers than their behaviorally targeted counterparts. While this lost value was millions of dollars in the aggregate, it was just $8.58 per opt-out consumer per year — not much of a bonanza for anyone.
Johnson notes that a significant portion of that money goes to publishers, and that they’re the ones most likely to get hurt if those advertising dollars go away through more stringent opt-in policies. (The fact that both Firefox and Safari block tracking by default will further diminish publishers’ monetization opportunities.) While Johnson believes consumers should value their privacy, they should also recognize that their data helps fund the creation of content they consume and enjoy. “There’s no free lunch,” says Johnson. “We all get value from this arrangement, and altering it will have profound consequences for the free Internet.”
“Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry?” has been published by the Institute for Operations Research and the Management Sciences (INFORMS).