Ad Networks and Consumer Tracking

Anna D’Annunzio () and Antonio Russo ()
Additional contact information
Anna D’Annunzio: Toulouse Business School, 31068 Toulouse, Cedex 7, France;
Antonio Russo: Loughborough University, School of Business and Economics, LE11 3TU Loughborough, United Kingdom; ETH Zurich, 8092 Zurich, Switzerland
Authors registered in the RePEc Author Service: Anna D'Annunzio

Management Science, 2020, vol. 66, issue 11, 5040-5058

Abstract: We study the role of ad networks in the online advertising market. Our baseline model considers two publishers that can outsource the sale of their ad inventories to an ad network, in a market where consumers and advertisers multi-home. The ad network increases total advertising revenue by tracking consumers across outlets and reduces competition between publishers by centralizing the sale of ads. Consequently, outsourcing to the ad network benefits the publishers, but may penalize the advertisers. We show that the ad network’s ability to track consumers may either expand or reduce the provision of ads, depending on consumers’ preferences for the publishers and how advertisers use tracking information. Specifically, tracking is more likely to expand (respectively, reduce) the provision of ads when consumers’ preferences for the publishers are positively (respectively, negatively) correlated. Tracking is also more likely to expand (respectively, reduce) the provision of ads when advertisers use tracking information to cap the frequency of impressions (respectively, target specific consumers). Furthermore, we study the implications of consumers’ choice to block tracking. Generally, blocking negatively impacts the advertising industry by making ad allocation less effective. Blocking also entails an externality on consumers, which is negative when tracking reduces the provision of ads. Given these conditions, regulatory restrictions on tracking may reduce consumer surplus as well as advertising revenue. These findings contrast with the presumption that regulation should make it easier for consumers to avoid tracking. We propose further extensions, including competing ad networks, more than two publishers, and networks that do not sell ads, but only tracking information to the advertisers.

Keywords: advertising; ad network; Internet; tracking; multi-homing; privacy (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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https://doi.org/10.1287/mnsc.2019.3481 (application/pdf)

Related works:
Working Paper: Ad Networks and Consumer Tracking (2017)
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