Targeted Advertising and Consumer Privacy Concerns

The rush of marketing expenditures in the Internet has made effectiveness and efficiency increasingly relevant. In particular, online firms offering free content need to provide powerful marketing tools to advertisers to support their own business models. Behavioral targeting enables websites to selectively display advertisements to consumers according to their surfing profiles, making advertisements more relevant, and thereby increasing advertising revenues from websites. Consequently, it is often seen as a savior by online firms struggling to finance their free content. However, targeting can raise privacy concerns, leading to negative consumer reactions. Furthermore, there is increasing regulatory pressure for websites to inform surfers about targeting practices and provide them with opt-in or opt-out functions. Proactively addressing those challenges to sustain revenues from targeted advertising is highly important¿in particular for advertising-supported websites¿and requires systematic research. Such research, though, has to account for the fact that the profiling of consumers to increase advertising revenues raises ethical questions, especially because targeting often occurs without consumers¿ knowledge. This doctoral dissertation studies consumer privacy concerns with regard to online targeting practices. Specifically, it investigates how privacy concerns affect consumers¿ perceptions of targeted advertisements. Furthermore, building on social exchange theory, fairness norms, and previous research on consumer privacy concerns in related areas, such as direct mail and e-commerce, I develop tangible, managerial operational mechanisms to increase consumers¿ acceptance of targeting and improve consumers¿ perceptions of targeted advertisements. In order to ensure that these mechanisms are in line with principles of business ethics, I derive normative requirements for these mechanisms from integrative social contracts theory.