The Welfare Impact of Targeted Advertising Technologies
Authors: Marotta, Veronica; Wu, Yue; Zhang, Kaifu; Acquisti, Alessandro
Journal: Information Systems Research (2022)
<jats:p> 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…