NEW YORK – In the era of online surveillance, consumers continually express concerns about how their digital footprint is being tracked and their privacy compromised. However, according to new research from Columbia Business School’s Carson Family Professor of Business Miklos Sarvary, Associate Professor of Business Kinshuk Jerath, and doctoral student W. Jason Choi, consumers may be willing to give up some of their privacy and allow themselves to be tracked.
The reason being that digital tracking might reduce the number of advertisements that consumers have to view by reducing wasteful advertising. The researchers investigate the impact consumers’ internet activity is having on the online advertising ecosystem, particularly when privacy regulations allow users to opt-in to digital tracking services.
The working study models the consumer’s journey to buy a product, also known as a purchase funnel, by developing a multi-period game theory model in which consumers visit content pages that create opportunities for ad impressions over time. The incorporation of privacy options allowed the researchers to understand the factors driving the consumers choices about whether or not to allow advertisers to track their online behavior.
The research provides a roadmap for both marketers and regulators as privacy regulations like the EU’s General Data Protection Regulation (GDPR) require consumer consent for their online activity to be tracked. Simultaneously, the research identifies conditions where consumers, advertisers, and ad networks (platforms that match advertisers to ads) can mutually benefit, such as when the ad network credibly commits to not track consumers.
The study, Customer Purchase Journey, Privacy Choices, and Advertising Strategies is available online here.
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