Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry?

Garrett A. Johnson (), Scott K. Shriver () and Shaoyin Du ()
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Garrett A. Johnson: Questrom School of Business, Boston University, Boston, Massachusetts 02215
Scott K. Shriver: Leeds School of Business, University of Colorado Boulder, Boulder, Colorado 80309
Shaoyin Du: Simon Business School, University of Rochester, Rochester, New York 14620

Marketing Science, 2020, vol. 39, issue 1, 33–51

Abstract: We study consumer privacy choice in the context of online display advertising, where advertisers track consumers’ browsing to improve ad targeting. In 2010, the American ad industry self-regulated by implementing the AdChoices program: consumers could opt out of online behavioral advertising via a dedicated website, which can be reached by clicking the overlaid AdChoices icons on ads. We examine the real-world uptake of AdChoices using transaction data from an ad exchange. Though consumers express strong privacy concerns in surveys, we find that only 0.23% of American ad impressions arise from users who opted out of online behavioral advertising. We also find that opt-out user ads fetch 52% less revenue on the exchange than comparable ads for users who allow behavioral targeting. These findings are broadly consistent with evidence from the European Union and Canada, where industry subsequently implemented the AdChoices program. We calculate that the inability to behaviorally target opt-out users results in a loss of about $8.58 in ad spending per American opt-out consumer, which is borne by publishers and the exchange. We find that opt-out users tend to be more technologically sophisticated, though opt-out rates are also higher in older and wealthier American cities. These results inform the privacy policy discussion by illuminating the real-world consequences of an opt-out privacy mechanism.

Keywords: privacy; digital advertising; consumer protection; self-regulation (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (41)

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