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Ad networks and consumer tracking

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journal contribution
posted on 07.10.2019, 14:55 by Anna D'Annunzio, Antonio RussoAntonio Russo
We study the role of ad networks in the online advertising market. Our baseline model considers two publishers that can outsource the sale of their ad inventories to an ad network, in a market where consumers and advertisers multi-home. The ad network increases total advertising revenue by tracking consumers across outlets and reduces competition between publishers by centralizing the sale of ads. Consequently, outsourcing to the ad network is beneficial to the publishers, but may penalize the advertisers. We show that the ad network’s ability to track consumers may either expand or reduce the provision of ads, depending on consumers’ preferences for the publishers and how advertisers use tracking information. Specifically, tracking is more likely to expand (resp. reduce) the provision of ads when consumers’ preferences for the publishers are positively (resp. negatively) correlated. Tracking is also more likely to expand (resp. reduce) the provision of ads when advertisers use tracking information to cap the frequency of impressions (resp. target specific consumers). Furthermore, we study the implications of consumers’ choice to block tracking. Generally, blocking generates a negative impact on the advertising industry, by making the allocation of ads less effective. Blocking also entails an externality on consumers, which is negative when tracking reduces the provision of ads. Given these conditions, regulatory restrictions on tracking may reduce consumer surplus as well as advertising revenue. These findings contrast with the presumption that regulation should make it easier for consumers to avoid tracking. We propose further extensions, including competing ad networks, more than two publishers and networks that do not sell ads, but only tracking information to the advertisers.

History

School

  • Business and Economics

Department

  • Economics

Published in

Management Science

Volume

66

Issue

11

Pages

4921 - 5484

Publisher

INFORMS

Version

AM (Accepted Manuscript)

Rights holder

© INFORMS

Publisher statement

This paper was accepted for publication in the journal Management Science and the definitive published version is available at https://doi.org/10.1287/mnsc.2019.3481.

Acceptance date

02/08/2019

Publication date

2019-11-25

Copyright date

2019

ISSN

0025-1909

eISSN

1526-5501

Language

en

Depositor

Dr Antonio Russo

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