Abstract: We analyze the welfare implications of consumer data sharing, and restrictions t ...
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Abstract: We analyze the welfare implications of consumer data sharing, and restrictions to that sharing, in the context of online targeted advertising. Targeting technologies offer firms the ability to reach desired audiences through intermediary platforms. The platforms run auctions in real time to display ads on internet sites, leveraging consumers’ personal information collected online to personalize the ads. The online advertising industry posits that targeted advertising benefits advertising firms (that is, merchants who want to target ads to the desired consumers), consumers who see ads for preferred products, and the intermediary platforms that match consumers with firms. However, the claims that targeted advertising benefits all players involved have not been fully vetted in the literature. We develop an analytical model to analyze the economic and welfare implications of targeting technologies for those three players under alternative consumer information regimes. The regimes differ in the type and amount of consumer data available to the intermediary and to the advertising firms, and reflect the presence or absence of technological or regulatory restrictions to personal information flows. We find evidence of incentive misalignment among the players, as the intermediary prefers to share only a subset of consumer information with firms, whereas advertising firms prefer having complete information about the consumers. As such, a strategic intermediary with the ability to control which information is shared during the auction can have an incentive to use only the information that maximizes its payoff, overlooking the interests of both advertising firms and consumers. The information regimes that maximize consumer welfare vastly differ depending on consumers’ heterogeneity along two dimensions: a horizontal dimension, capturing consumer’s heterogeneity in product preferences; and a vertical dimension, capturing consumers’ heterogeneity in purchase power. Consumers prefer none of their personal information to be used for targeting only in limited circumstances. Otherwise, consumers are either indifferent or prefer only specific types of information to be used for targeting.
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Semantic filters:
digital mediareal-time bidding
Topics:
advertising management IS economics consumer surplus privacy marketing management
Methods:
archival research mathematical model theory development
Theories:
auction theory
Toward a Digital Attribution Model: Measuring the Impact of Display Advertising on Online Consumer Behavior
2016 | Management Information Systems Quarterly | Citations: 29
Authors: Ghose, Anindya; Todri-Adamopoulos, Vilma
Abstract: The increasing availability of individual-level data has raised the standards fo ...
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Abstract: The increasing availability of individual-level data has raised the standards for measurability and accountability in digital advertising. Using a massive individual-level data set, our paper captures the effectiveness of display advertising across a wide range of consumer behaviors. Two unique features of our data set that distinguish this paper from prior work are (1) the information on the actual viewability of impressions as on average 55% of the display ads are not rendered viewable and (2) the duration of exposure to the display advertisements, both at the individual-user level. Employing a quasi-experiment enabled by our setting, we use difference-in-differences and corresponding matching methods as well as instrumental variable techniques to control for unobservable and observable confounders. We empirically demonstrate that mere exposure to display advertising increases users’ propensity to search for the brand and the corresponding product; consumers engage both in active search exerting effort to gather information, and in passive search using information sources that arrive exogenously. We also find statistically and economically significant effects of display advertising on increasing consumers’ propensity to make a purchase. Furthermore, our findings reveal that the longer the duration of exposure to display advertising, the more likely the consumers are to engage in direct search behaviors (e.g., direct visits) rather than indirect ones (e.g., search engine inquiries). We also study the effects of various types of display advertising (e.g., prospecting, retargeting, affiliate targeting, video advertising, etc.) and the different goals they achieve. Our framework for evaluating display advertising effectiveness constitutes a stepping stone toward causally addressing the digital attribution problem.
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