Targeted Advertising and Consumer Privacy Concerns Experimental Studies in an Internet Context

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1 TECHNISCHE UNIVERSITAT MUNCHEN Lehrstuhl fur Betriebswirtschaftslehre - Dienstleistungsund Technologiemarketing Targeted Advertising and Consumer Privacy Concerns Experimental Studies in an Internet Context Nicole Grone Vollstandiger Abdruck der von der Fakultat fur Wirtschaftswissenschaften der Technischen Universitat Munchen zur Erlangung des Grades eines Doktors der Wirtschaftswissenschaften (Dr. rer. pol.) genehmigten Dissertation. Vorsitzende: Priifer der Dissertation: Univ.-Prof. Dr. Claudia Peus 1. Univ.-Prof. Dr. Florian von Wangenheim 2. Univ.-Prof. Dr. Isabell M. Welpe Die Dissertation wurde am bei der Technischen Universitat Munchen eingereicht und durch die Fakultat fur Wirtschaftswissenschaften am angenommen.

2 Table of Contents Preface... Ill Short Table of Contents Table of Contents List of Figures List of Tables V VII XII List of Abbreviations -. XV List of Symbols XVIII Summary 1. Introduction 1 XIII XIX 1.1 Targeting as a Controversial Means to Increase Advertising Revenues Research Scope Proceedings of the Dissertation 8 2. The Targeting of Online Advertising Introduction to Targeting in the Context of Online Advertising Online Advertising as a Revenue Source Categories of Online Advertising Pricing Models of Online Advertising Online Targeting as a Means to Reduce Waste Technological Foundations of Online Targeting Online Targeting Methods Legal Limitations on Targeted Online Advertising Privacy Regulations in Germany Privacy Regulations in the U.S Targeting as a Means to Increase Advertising Effectiveness Targeting and Advertising Effectiveness Models Studies on Targeting Effectiveness...: Intrusiveness as a Risk to Targeting Effectiveness Attitude toward an Advertisement as a Mediator of Advertising Effectiveness Intrusiveness as an Antecedent of Attitude toward an Advertisement The Need for a Better Understanding of Intrusiveness in the Context of Targeted Online Advertising Consumer Privacy Concerns Online 55 VII

3 3.1 Foundations of Consumer Privacy Concerns The Construct of Consumer Privacy Concerns Theories in Consumer Privacy Research ^ Social Exchange Theory Psychological Justice Theories Perceived Sensitivity of Different Types of Information Consumer Privacy Concerns and the Internet Findings on Consumer Privacy Concerns Online Antecedents of Consumer Privacy Concerns Online External Factors Situational Factors Individual Specific Factors Consequences of Consumer Privacy Concerns Online Behavioral Protection Technological Protection Public and Private Action Response to Advertisements Trust as Moderator of Privacy Concerns Factors Influencing the Provision of Information Factors Reducing Privacy Risks Information Requested Privacy Statements Other Trust-enhancing Factors Factors Increasing Benefits Financial Rewards Personalization Reduction of Advertisements The Need for an Investigation of Factors Increasing the Acceptance of Targeted Online Advertising Targeted Advertising as a Social Contract Social Contract Theory as Appropriate Normative Foundation for Targeted Advertising The Roots of Social Contract Theory Justice, Morality and Norms within Social Contract Theory Integrative Social Contracts Theory as Guidance for Business Ethics 95 VIII

4 4.2 Applying Integrative Social Contracts Theory to Targeted Advertising The Role of Procedural Justice and Fair Information.^. Practices The Role of Distributive Justice, Equity, and Reciprocity Equity as a Referent Standard for Distributive Justice Reciprocity as a Universal Norm Research Model and Hypotheses Integrative Social Contracts Theory and Social Exchange Theory as a Research Frame Acceptance of Targeting and Perceived Intrusiveness as Relevant Target Variables The Effect of Knowledge about Targeting Practices on Intrusiveness Ill 5.4 Mechanisms Derived from Procedural Justice Research Model related to Providing a High Level of Control Perceived Procedural Justice Risk Beliefs Trusting Beliefs Overall Effect of Providing a High Level of Control Mechanisms Derived from Distributive Justice Research Model related to Emphasizing Advertising Relevance Relevance Anticipation Overall Effect of Emphasizing Advertising Relevance Research Model related to Appealing to Reciprocity Normative Reciprocity Perceived Distributive Justice Utilitarian Reciprocity Overall Effect of an Appeal to Reciprocity Interaction of Relevance and Reciprocity Influence of Non-Situational Factors General Concern for Privacy Other Non-Situational Factors Empirical Research 134 IX

5 6.1 Research Design Methodological Considerations Experiments as Research Design Validity of Results Priming Methods Design of Experiment Target Variables Experimental Conditions Control of Extraneous Factors and Cognitive Processes Data Collection and Sample Design of Experiment Target Variables 153 ^ Experimental Conditions Control of Extraneous Factors and Cognitive Processes Data Collection and Sample Validation of Scales SR-Level Hypotheses Testing Results of Experiment Selection of MANCOVA Procedures Test of Requirements and Cell Equalization Results of MANCOVA Hypotheses Tests Additional Analyses Regarding Cognitive Processes Results of Experiment Selection of Chi-square Testing Procedures Test of Requirements Results of Chi-square Hypotheses Tests Additional Analyses Regarding Cognitive Processes SOR-Level Hypotheses Testing Selection of SEM Procedures Test of Requirements and Selection of Estimation Algorithm Validation of the Structural Model Results of Model Estimation and Hypotheses Tests Assessment of Common Methods Biases Tests of Full Mediation within the SOR-Model 203

6 6.5 Further Exploratory Analyses Acceptance of Advertising as Online Currency Demographics, Privacy Concerns, and the Provision of.-^ Information Responses to Predictive Targeting Survey in Experiment Interests by Scenario and Website Internet Usage Pattern Discussion of Empirical Results Theoretical Implications Managerial Implications Limitations and Potential for Future Research 235 References 239 Appendix 277 I. Translation of the Questionnaires 277 II. Documentation of Experiment 1: Screenshots 284 III. Mean Comparisons Based on Full Sample in Experiment IV. Frequencies of Completed Surveys vs. Aborted Surveys in Experiment 2 by Scenario 288 V. Motivation to Provide Information per Scenario by Website in Experiment VI. Overview of Requirements and Characteristics of SEM Estimation Procedures 291 VII. Skewness and Kurtosis of Items in Structural Model 292 VIII. Effects of Control Variables on Dependent Variables in SEM Analysis 293 IX. Standardized Direct and Indirect Effect of Predictor Variables on the Dependent Variables in Model 294 X. Effects of Control Variables on the Dependent Variables when Controlling for a Common Method Factor 296 XI. Mean^Values of General Concern for Privacy, Risk Beliefs, Trusting Beliefs and Acceptance of Targeting by Demographic Groups 297 XII. Respondents in Experiment 2 by Demographic Groups and Scenario Compared to German Online Population and Newspaper Audience 298 XIII.Respondents' Interests per Scenario and Website in Experiment XIV.Respondents' Online Behavior by Scenario and Website 300 XI

7 List of Figures List of Figures Figure 1: Process of Ad Delivery Involving Different Ad Servers 20 Figure 2: Examples of Predictive Targeting Survey Teasers.".*. 27 Figure 3: The Elaboration Likelihood Model of Persuasion 43 Figure 4: The Dual Mediation Hypothesis of Advertising Effectiveness 51 Figure 5: Perceived Sensitivity of Different Data Categories 65 Figure 6: Research Framework of Dissertation Integrating a Descriptive and a Normative Perspective on Targeted Advertising 109 Figure 7: Research Model Related to Providing a High Level of Control 120 Figure 8: Research Model Related to Emphasizing Advertising Relevance 125 Figure 9: Research Model Related to Appealing to Reciprocity 131 Figure 10: The Priming Process 141 Figure 11: Screenshot of One Experimental Treatment in Experiment Figure 12: Screenshot of the Tool Providing Customers with a High Level of Control 148 Figure 13: Illustration of the Target Variables in Experiment Figure 14: Design of Experiment Figure 15: SR-Model Tested through Experiments 1 and Figure 16: Full Structural (SOR-) Model Including Experimental Conditions 189 Figure 17: Estimated Standardized Path Coefficients in Structural Model 196 XII

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