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Social Networks, Personalized Advertising, and Privacy Controls

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Abstract

This paper investigates how internet users' perception of control over their personal information affects how likely they are to click on online advertising. The paper uses data from a randomized field experiment that examined the relative effectiveness of personalizing ad copy to mesh with existing personal information on a social networking website. The website gave users more control over their personally identifiable information in the middle of the field test. The website did not change how advertisers used anonymous data to target ads. After this policy change, users were twice as likely to click on personalized ads. There was no comparable change in the effectiveness of ads that did not signal that they used private information when targeting. The increase in effectiveness was larger for ads that used less commonly available private information to personalize their message. This suggests that giving users the perception of more control over their private information can be an effective strategy for advertising-supported websites.

Suggested Citation

  • Catherine Tucker, 2010. "Social Networks, Personalized Advertising, and Privacy Controls," Working Papers 10-07, NET Institute.
    • Handle: RePEc:net:wpaper:1007
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    References listed on IDEAS

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    1. Bharat Anand & Ron Shachar, 2009. "Targeted advertising as a signal," Quantitative Marketing and Economics (QME), Springer, vol. 7(3), pages 237-266, September.
    2. Avi Goldfarb & Catherine Tucker, 2011. "Online Display Advertising: Targeting and Obtrusiveness," Marketing Science, INFORMS, vol. 30(3), pages 389-404, 05-06.
    3. Avi Goldfarb & Catherine E. Tucker, 2011. "Privacy Regulation and Online Advertising," Management Science, INFORMS, vol. 57(1), pages 57-71, January.
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    Citations

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    Cited by:

    1. Lasha Lanchava, 2013. "Free to Choose: An Experimental Investigation of the Value of Free Choice," CERGE-EI Working Papers wp492, The Center for Economic Research and Graduate Education - Economics Institute, Prague.
    2. Avi Goldfarb & Catherine Tucker, 2012. "Privacy and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 12(1), pages 65-90.
    3. Yoan Hermstrüwer & Stephan Dickert, 2013. "Tearing the Veil of Privacy Law: An Experiment on Chilling Effects and the Right to Be Forgotten," Discussion Paper Series of the Max Planck Institute for Research on Collective Goods 2013_15, Max Planck Institute for Research on Collective Goods.
    4. Freedman, Seth & Jin, Ginger Zhe, 2017. "The information value of online social networks: Lessons from peer-to-peer lending," International Journal of Industrial Organization, Elsevier, vol. 51(C), pages 185-222.
    5. Avi Goldfarb & Catherine E. Tucker, 2011. "Privacy Regulation and Online Advertising," Management Science, INFORMS, vol. 57(1), pages 57-71, January.
    6. Avi Goldfarb & Catherine Tucker, 2011. "Rejoinder--Implications of "Online Display Advertising: Targeting and Obtrusiveness"," Marketing Science, INFORMS, vol. 30(3), pages 413-415, 05-06.
    7. Cecere, Grazia & Le Guel, Fabrice & Soulié, Nicolas, 2012. "Perceived Internet privacy concerns on social network in Europe," MPRA Paper 41437, University Library of Munich, Germany.
    8. Sinan Aral & Dylan Walker, 2011. "Creating Social Contagion Through Viral Product Design: A Randomized Trial of Peer Influence in Networks," Management Science, INFORMS, vol. 57(9), pages 1623-1639, February.
    9. Avi Goldfarb, 2014. "What is Different About Online Advertising?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 44(2), pages 115-129, March.
    10. Moritz GODEL & Annabel LITCHFIELD & Iris MANTOVANI, 2012. "The Value of Personal Information: Evidence from Empirical Economic studies," Communications & Strategies, IDATE, Com&Strat dept., vol. 1(88), pages 41-60, 4th quart.
    11. Jenny Doorn & Janny Hoekstra, 2013. "Customization of online advertising: The role of intrusiveness," Marketing Letters, Springer, vol. 24(4), pages 339-351, December.
    12. Arnold, René & Hildebrandt, Christian & Taş, Serpil, 2020. "European data economy: Between competition and regulation. Final report," Study Series, WIK Wissenschaftliches Institut für Infrastruktur und Kommunikationsdienste GmbH, number 251538, December.
    13. Tucker, Catherine E., 2012. "The economics of advertising and privacy," International Journal of Industrial Organization, Elsevier, vol. 30(3), pages 326-329.

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    More about this item

    Keywords

    Social Networks; Privacy; Online Advertising;
    All these keywords.

    JEL classification:

    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising
    • M38 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Government Policy and Regulation

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