The Internet is dominated by websites that offer free content and generate their revenue by advertisements. Switching to targeted advertising can create greater revenues, because this increases the relevance of an advertisement. In that way the effectiveness of an advertisement can be increased leading to extra revenue. Targeted online advertising can be described as an advertisement that is based upon information of the receiver, like demographics, browsing behavior and purchase behavior. Companies spend around 2.6 billon dollar on online targeted advertising. But a lot of people show resistance against advertising that is based upon behavioral data, because of, for example, privacy concerns. Fifty percent of the people that are surfing online even believe that tracking user’ online behavior should be illegal (Alreck and Settle, 2007).
Most companies try to tackle this problem by telling people that the personal information increases the relevance of an advertisement. But such an argument might have weak effect of the willingness of a person to disclose personal information, because of the utilitarian nature of the argument (Schumann et al., 2014). According to the authors such an utilitarian approach neglects the fact that consumers can be motivated by other factors such as fairness and reciprocity. According to their study it’s better for a free website to tell the consumers that their support is needed to keep the web content free, which they call a reciprocity appeal approach. In this approach people should be more willing to provide a company with personal data as browsing behavior and demographic details. Thus, Schumann et al. (2014) provided evidence that people are more willing to accept online targeted marketing if they have the feeling that they are some kind of paying the company for the free content that they offer.
The findings of the study don’t only apply on websites that are offering free content, but also on other services that rely on advertising for their revenues. For example mobile application as games and free downloads of music. But, the user’ willingness to give away personal information depends on the service the website offers. If the value they receive from the website is lower than the value the company gets from the user-generated content, users are less willing to share their information. Users are namely aware of the value of user-generated content. In situations where there are higher utilitarian benefits for the user, the relevance argument can have more effect on the user’ willingness to share information.
The research offers a strategy for companies how they could increase the acceptance of targeted advertising by their consumers. They show that using a reciprocity argument would require a company less time and effort, but would generate higher profit. During the experiment a company saved around 80,000 dollars using the reciprocity argument, compared to the relevance argument, by collecting personal information about 10,000 people. There are not only financial benefits when using reciprocity arguments. Companies should prefer it above the relevance argument, because the relevance argument can also have negative effects if the promise of the company is not convincing. Lastly, with the current trend of privacy concerns of people, companies should be really careful with obtaining personal information. The findings of the study definitely contributes to this privacy concern, making the consumer more willing to share his information.
Alreck, P.L. and Settle R.B. (2007), Consumer Reactions to Online Behavioural Tracking and Targeting, Journal of Database Marketing & Customer Strategy Management, 15 (1), 11–23.
Schumann, J. H., von Wangenheim, F., & Groene, N. (2014). Targeted online advertising: Using reciprocity appeals to increase acceptance among users of free web services. Journal of Marketing, 78(1), 59-75.