Privacy Polls v. Real-World Trade-Offs

Abstract

A recent telephone poll conducted by professors at Berkeley and the University of Pennsylvania concluded, “Contrary to what many marketers claim, most adult Americans (66%) do not want marketers to tailor advertisements to their interest.”

What does this tell us about whether, and how, government should further regulate online advertising? Precious little: Not only does this poll overstate the costs of targeted advertising, understate its benefits, and ignore the tools available to users to address their privacy concerns but, like any opinion poll, this one tells us more about the psychology of decision-making under the artificial uncertainty of polls than about the choices users would actually make in the real world

Whatever Americans tell pollsters about “tailored” ads, they also complain about irrelevant ads: A previous poll found that 72% of consumers “find online advertising intrusive and annoying when the products and services being advertised are not relevant to [their] wants and needs." Meanwhile, users in the real world were two to eleven times more likely to click on highly-tailored ads. Users clearly “vote with their clicks” for ads they find relevant - i.e., they vote for “tailoring.”

Advertising is indispensable to the future of online media, but it is also currently inadequate to sustain “Free” culture. The advocates of regulation pay lip service to the importance of advertising in funding online content and services but don’t seem to understand that this quid pro quo is a fragile one: Tipping the balance, even slightly, could have major consequences for continued online creativity and innovation.

We need a behavioral economics experiment, not just another poll. If we really want to know how much subjective value consumers place on a particular aspect of their privacy, we must look to the preferences they reveal in the process of making real choices.

Keywords: targeted advertising, Online advertising, privacy polls, online privacy, online marketing, marketing, online ads, tailored ads, relevant ads, online content, free content, ad blocking, blocking ads, micropayments, internet advertising, internet ads, online media, social good, internet regulation

JEL Classification: C8, C9, C92, D18, D8, D82, D83, I2, I20, I28, L1, L11, L15, L5, L51, L82, L86, L96, L98, M3, M37, M3