The economics of advertising and privacy

One of the new realities of advertising is that personal information can be used to ensure that advertising is only shown and designed for a select group of consumers who stand to gain most from this information. However, to gather the data used for targeting requires some degree of privacy intrusion by advertisers. This sets up a tradeoff between the informativeness of advertising and the degree of privacy intrusion. This paper summarizes recent empirical research that illuminates this tradeoff. ► We discuss increased use of technology for targeting. ► We discuss how this improves informativeness of advertising. ► However, consumers may find this intrusive. ► We discuss recent empirical studies that explore this tradeoff. ► We then explore consequences for regulation and future work.