Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry?

49 Pages Posted: 21 Aug 2017 Last revised: 20 Jun 2019

See all articles by Garrett Johnson

Garrett Johnson

Questrom School of Business

Scott Shriver

Columbia Business School - Marketing

Shaoyin Du

University of Rochester - Simon Business School

Date Written: June 19, 2019

Abstract

We study consumer privacy choice in the context of online display advertising, where advertisers track consumers' browsing to improve ad targeting. In 2010, the American ad industry self-regulated by implementing the AdChoices program: consumers could opt out of online behavioral advertising via a dedicated website, which can be reached by clicking the overlaid “AdChoices” icons on ads. We examine the real-world uptake of AdChoices using transaction data from an ad exchange. Though consumers express strong privacy concerns in surveys, we find that only 0.23% of American ad impressions arise from users who opted out of online behavioral advertising. We also find that opt-out user ads fetch 52.0% less revenue on the exchange than do comparable ads for users who allow behavioral targeting. These findings are broadly consistent with evidence from the European Union and Canada, where industry subsequently implemented the AdChoices program. We calculate that the inability to behaviorally target opt-out users results in a loss of about $8.58 in ad spending per American opt-out consumer, which is borne by publishers and the exchange. We find that opt-out users tend to be more technologically sophisticated, though opt-out rates are also higher in older and wealthier American cities. These results inform the privacy policy discussion by illuminating the real-world consequences of an opt-out privacy mechanism.

Keywords: Privacy, digital advertising, consumer protection, self-regulation

JEL Classification: M37, L50

Suggested Citation

Johnson, Garrett and Shriver, Scott and Du, Shaoyin, Consumer Privacy Choice in Online Advertising: Who Opts Out and at What Cost to Industry? (June 19, 2019). Simon Business School Working Paper No. FR 17-19. Available at SSRN: https://ssrn.com/abstract=3020503 or http://dx.doi.org/10.2139/ssrn.3020503

Garrett Johnson (Contact Author)

Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA 02215
United States
6173534677 (Phone)

HOME PAGE: http://www.bu.edu/questrom/faculty-research/faculty-directory/garrett-johnson/

Scott Shriver

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

Shaoyin Du

University of Rochester - Simon Business School ( email )

Rochester, NY 14627
United States

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