6 Pages Posted: 26 Feb 2009 Last revised: 5 Aug 2014
Date Written: September 1, 2008
Since the fall of 2008, a debate has raged in Washington over "targeted online advertising," shorthand for the customization of Internet ads to match the interests of users. Not only are these ads more relevant and therefore less annoying to Internet users than untargeted ads, they are more cost-effective to advertisers and more profitable to websites that sell ad space. This growing revenue stream ultimately funds the free content and services that Internet users increasingly take for granted, and policymakers should think very carefully about what's really best for consumers before rushing to regulate an industry that has thrived for over a decade under a layered approach that combines technological "self-help" by privacy-wary consumers, consumer education, industry self-regulation, existing state privacy tort laws, and Federal Trade Commission (FTC) enforcement of corporate privacy policies.
A cost/benefit analysis of regulation, along with the availability of less restrictive yet generally more effective self-help privacy tools, are vital considerations for the future of the Internet. If smarter online advertising will not fund the Internet's future, what will? As both the desire for "free" services and content and the need for bandwidth expand, OBA has the potential to offer important new revenue sources that can help support the entire ecosystem of online content creation and service innovation, while also providing a new source of funding for Internet infrastructure and making ads less annoying and more informative.
Smarter advertising ultimately makes all kinds of speech more cost-effective, and also increases the ability of political and other not-for-profit speakers to communicate their messages. In short, smarter advertising means more voices, more choices, and more speech. The line between "advertising" and "content" is already blurring rapidly, as technologies used to customize advertising are also used to customize webpages and ad networks themselves are used to deliver content.
Keywords: online targeted advertising, online advertising, targeted online, online behavioral advertising, online ads, internet advertising, internet ads, self-regulation, FTC, online privacy, consumer privacy, consumer protection, privacy, free speech, e-commerce, child safety, parental controls, OBA
JEL Classification: D18, D8, D82, D83, I2, I20, I28, L1, L11, L15, L5, L51, L82, L86, L96, L98, M3, M37, M31, O3, O31
Suggested Citation: Suggested Citation
Szoka, Berin Michael and Thierer, Adam D., Online Advertising & User Privacy: Principles to Guide the Debate (September 1, 2008). Progress & Freedom Foundation Progress Snapshot Paper, Vol. 4, No. 19, September 2008. Available at SSRN: https://ssrn.com/abstract=1348600