Interest-Based Internet Advertising and Privacy Concerns: How to Increase the Acceptance of a Rising Marketing Phenomenon

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1 Interest-Based Internet Advertising and Privacy Concerns: How to Increase the Acceptance of a Rising Marketing Phenomenon Nicole Groene, Florian von Wangenheim, Jan H. Schumann Technische Universität München As marketing expenditures in the Internet rush, effectiveness and efficiency become increasingly relevant. Particularly online-firms offering free content need to provide powerful marketing tools to advertisers to support their own business model. Behavioral targeting enables websites to selectively display advertisements to consumers according to their surfing profiles, making advertisements more relevant, thereby increasing advertising revenues from websites. However, targeting can cause privacy concerns and negative consumer reactions. Furthermore, there is increasing regulatory pressure for websites to inform surfers about targeting practices and provide them with opt-out functions. Proactively addressing those challenges is highly important for advertising-supported websites. Building on privacy related fairness norms, the authors develop mechanisms to increase consumers acceptance of targeted advertising. In a laboratory and a large-scale field experiment, they find that under certain conditions, surfers are motivated by reciprocity. When reminded that targeted online advertisements help fund free content, consumers are not only more willing to provide information but also perceive targeted advertisements as less intrusive. To further address privacy concerns, websites should allow consumers to access and edit their information. 1. Introduction The Internet already constitutes the second-largest advertising medium, and while advertising revenues from traditional media have stagnated, online advertising revenues are expected to grow continuously (Interactive Advertising Bureau, 2010). Within online marketing, behaviorally targeted advertising has emerged as a major trend that is predicted to account for one-forth of total U.S. display advertising revenues by 2012 (Hallerman, 2008). Targeting enables websites to increase advertising relevance and, thus, effectiveness by selectively displaying advertisements to surfers with specific interests (Iyer; Soberman; Villas-Boas, 2005). This is typically achieved by placing cookies on surfers web browsers that often track surfing behaviors across websites within an advertising network (McDonald; Cranor, 2010). Therefore, target- 1

2 ed advertising enables websites to charge higher prices for their advertising space as it reduces waste for the advertiser. Research on behavioral targeting is limited and controversial. On the one hand, studies sponsored by targeting firms report substantial increases in click rates of up to 1000% through behavioral targeting (e.g., Yan et al., 2009). On the other hand 66% of American adults reject behavioral targeting (Turow et al., 2010). Thus, while several academic studies report that consumers are concerned about their privacy with regard to behavioral targeting (e.g., Alreck; Settle, 2007; McDonald; Cranor, 2010), there is a surprising lack of research on how marketers can address consumers privacy concerns and increase the acceptance of behavioral targeting. Such research is particularly relevant for advertising-supported websites, such as newspapers, communities, and directories in light of the recent Do Not Track proposal by the Federal Trade Commission (FTC). The proposal suggests the installation of a nationwide optout tool through which consumers can restrict the collection of information about their web browsing behavior (Federal Trade Commission, 2010). Whereas such a tool provides consumers with better choice regarding their privacy online, it will most likely lead to a drop in advertising revenues if websites do not find mechanisms to increase the acceptance of targeting and thus reduce the number of individuals seeking an opt-out. Finding ways to increase the acceptance of targeting, however, is also important to avoid other harmful consequences resulting from consumer privacy concern, such as website avoidance (Wirtz; Lwin, 2009) or negative word-of-mouth (Son; Kim, 2008). Furthermore, in a large-scale study on targeting and obtrusiveness of display advertisements, Goldfarb and Tucker (2011a) suggest that privacy concerns even negatively affect advertising effectiveness. In recent commentaries to their article, several researchers stress the importance of research on the underlying cognitive mechanisms of privacy concerns and advertising effectiveness (Goldfarb; Tucker, 2011b; Lodish; Reed II, 2011). In the context of direct mail and e-commerce, research on factors that increase the acceptance of personalization usually assumes that consumers perform a utilitarian cost benefit trade-off with regard to their privacy (e.g. Xie; Teo; Wan, 2006). Several studies find that consumers are willing to provide marketers with personal information if they receive financial rewards, such as coupons or discounts (e.g., Hann et al., 2007; Hui; Teo; Lee, 2007). However, the applicability of these findings in the context of targeted advertising is limited because providing consumers with monetary benefits is hardly implementable on non-e-commerce websites. Thus, in practice, websites currently trying to increase consumers acceptance of targeting usually emphasize that targeting makes their advertisements more relevant instead of offering monetary benefits (e.g., Google, 2009; Yahoo, 2011). Regarding free online content, complementing the common utilitarian perspective on factors that increase consumers acceptance of personalization with a normative perspective that includes considerations of fairness and reciprocity seems suitable. Research in the context of pay-what-you-want pricing mechanisms shows that consumers voluntarily pay something for a service received, even if they do not have to (Kim; Natter; Spann, 2009). Surprisingly this finding has not yet been applied to the context of free online content and advertising acceptance. Against this background, the research objectives of this article are threefold: 1. To examine how privacy concerns related to targeting practices affect consumers perceptions of targeted advertisements, a proven mediator of advertising effectiveness. 2. To identify and test mechanisms that increase the acceptance of behavioral targeting based on fairness norms, 2

3 and 3. To test whether the identified mechanisms improve consumers perceptions of targeted advertisements. Figure 1 provides an overview of the theoretical foundation of our research framework. We test these mechanisms with data from two studies: a laboratory experiment accompanied by a survey and a large-scale field experiment. Tangible Mechanisms (Statements/Teaser) Behavioral and Attitudinal Response Targeting as Social Exchange involving a cost benefit assessment H 1 Distributive Justice (Benefits) Relevance H 4a H 2a Reciprocity H 3a Acceptance of Targeting H 4b H 5a Procedural Justice (Cost) Control (Access and Editing) H 2b H 3b H 5b Perceived Intrusiveness Covariates General Concern for Privacy General Attitude to Advertising Perceived Utility of Website STUDY 1 STUDY 2 Fig. 1: Theoretical Foundation of Research Framework of Studies 2. Theoretical Background and Literature Review 2.1. Consumers Online Privacy Concerns and Fairness In a marketing context, information privacy concern refers to the extent to which a person is worried about the practices of an organization regarding the collection and subsequent use of his or her personal information (Smith; Milberg; Burke, 1996). Recent online privacy literature indicates that this concern pertains to two facets of the interaction with a marketer: First, consumers are concerned about potentially harmful consequences of information collection (Malhotra; Kim; Agarwal, 2004), such as monetary (e.g.; Youn, 2009) or psychological harm (e.g., Dinev; Hart, 2006). Second, consumers are concerned about the fairness of their interaction with a marketer involving their information (Ashworth; Free, 2006). With regard to procedural fairness (i.e. the fairness of procedures and how they are enacted; Thibaut; Walker, 1975), consumers concerns revolve around being aware of marketers information practices and having control over their information (Malhotra; Kim; Agarwal, 2004). Yet, so far, the role of distributive fairness (i.e. the perceived fairness of the allocation of outcomes of an exchange; Homans, 1961), in influencing privacy concern has received only limited attention (e.g., Ashworth; Free, 2006; Dinev; Hart, 2006). 3

4 2.2. Acceptance of Personalization Most studies conceptualize information privacy and consumers provision of information to a marketer as a social exchange (e.g., Hui; Teo; Lee, 2007; Xie; Teo; Wan, 2006). They assume that consumers perform a so-called privacy calculus in which they weight potential benefits of information provision against the psychological and monetary cost of a potential privacy intrusion. The tangible factors influencing the provision of information can be classified as reducing the risks associated with the provision of information, such as a privacy policy (e.g., Hann et al., 2007) and the (in)sensitivity of information gathered (e.g., Malhotra; Kim; Agarwal, 2004). The other factors represent benefits to consumers, such as financial rewards (e.g., Hui; Teo; Lee, 2007) and convenience (Hann et al., 2007). Yet, the existing findings are of limited applicability to our research since they are either context specific such as convenience in an online store or room to provide financial benefits is limited because free content websites often struggle to finance their operations. 3. Research Framework and Hypotheses Similar to the theoretical framework employed by previous privacy researchers, we conceptualize behavioral targeting as a social exchange between a website and its surfers. In this exchange relationship, a website offers free content to a consumer. In return, the consumer watches advertisements and allows targeting so that the website can receive advertising revenues from a third party the advertiser that targets this consumer. According to social exchange theory (SET) (e.g., Homans, 1961; Thibaut; Kelley, 1959) individuals evaluate their relationships with regard to costs and rewards. Accordingly, consumers are only willing to accept targeting if their perceived benefits are greater than the corresponding privacy cost. Because consumers privacy concerns revolve around the fairness of their interaction with a marketer (e.g., Ashworth; Free, 2006), we assume that norms related to fairness constitute a suitable basis to derive mechanisms for website to sustain or even increase revenues through targeted advertising Impact of Targeting on Perceived Intrusiveness An informed consent to targeting requires that consumers are informed about the behavioral advertising practices employed by a website. However, since most consumers are currently not fully aware of targeting practices (McDonald; Cranor, 2010), transparency might result in a higher perceived intrusiveness of targeted advertisements. This is because surfers who know or suspect that an advertisement shown to them has been delivered through behavioral targeting might perceive this as a threat to their ability to avoid being profiled when surfing online. This perception should lead to reactance, a proven mediator of intrusiveness (Edwards; Li; Lee, 2002). Furthermore, the cognitions related to a potential threat of their privacy resulting from behavioral targeting require additional mental processing and thus interrupt surfers cognitive processes. Thus: H 1 : When informed about behavioral targeting practices employed by a website, consumers perceive its advertisements as more intrusive than when not informed. 4

5 3.2. Mechanisms Related to Distributive Justice In exchange relationships with business partners, individuals typically assess the fairness of the allocation of outcomes according to the norm of equity (Aggarwal, 2004). Consequently, in exchange relationships in which the norm of equity is particularly salient, people s motivation is to get something back in return, that is quid pro quo (Aggarwal, 2004, 88) Increasing benefits through advertising relevance. The most obvious way to increase distributive justice in the context of behavioral advertising is to increase consumers perceived benefits from targeting. Regarding benefits, the advertising industry often claims that targeting makes advertisements more interesting and more useful to consumers (Alreck; Settle, 2007). From an academic perspective, there is some support for this claim. In a direct mail context, Milne and Gordon (1993) find that respondents prefer less mail and more targeted mail. This is in line with Alreck and Settle (2007), who emphasize the advantage of targeting in reducing irrelevant advertisements. Also Edwards, Li, and Lee (2002) show that advertisements deemed informative are perceived less intrusive. Thus: H 2 : Informing customers that targeting makes advertisements more interesting to them a) increases consumers acceptance of targeting and b) reduces the perceived intrusiveness of targeted advertisements, compared with not emphasizing relevance Increasing fairness through reciprocity. Another way to positively influence consumers perceptions of distributive justice is to alter the perceived input of the website. As SET assumes that individuals perform actions that are rewarding to them (Emerson, 1976), this should be done in a way that consumers are motivated to participate in the exchange involving their information. Here the norm of reciprocity (Gouldner, 1960) might have motivational power, as it entails a person s innate desire to repay a favor, which is typically driven by a feeling of indebtedness towards the donor (Greenberg, 1980). Free content might constitute a benefit that consumers might wish to reciprocate, for example, by consenting to targeting. Yet, after many years of consuming free content, consumers have developed a free mentality (Dou, 2004). Therefore, the norm of reciprocity might not be focal in the context of targeted advertising. Employing cues that make the norm of reciprocity more salient with regard to a website s provision of free content to the consumer might evoke a desire to reward the website. Thus: H 3 : An appeal to reciprocity a) increases customers acceptance of targeted advertising on a website and b) reduces the perceived intrusiveness of targeted advertisements on a website, compared with not appealing to reciprocity Interaction of equity and reciprocity. If different norms are applicable in a given situation, the norm that is activated guides behavior (Cialdini; Kallgren; Reno, 1991). The two mechanisms suggested might create two forces: While the relevance mechanism aims to satisfy the desire to be rewarded by the website, the reciprocity mechanism aims to create a desire to reward the website. Thus: H 4 : Informing customers about the benefits of advertising relevance and appealing to reciprocity interact such that the total effect on a) acceptance of targeting and b) per- 5

6 ceived intrusiveness of employing both mechanisms simultaneously is weaker than the sum of the effects if each of these mechanisms were employed individually Mechanism Related to Procedural Justice Consumers assessment of procedural justice is informed by the norms of openness, honesty, permission, and information access (Ashworth; Free, 2006). Overall, consumers consider organizations procedures fair when they are vested with control over the procedures (Son; Kim, 2008). Allowing consumers to control how their information is collected and subsequently used reduces their risk of privacy intrusions and communicates a company s respect and value for them (Ashworth; Free, 2006). Thus, acting according to the standards of procedural fairness increases the perceived trustworthiness of a company and increases consumers willingness to disclose information for targeted marketing (Culnan; Armstrong, 1999). Specifically granting consumers access to their information might reduce their uncertainty about a website s data collection and, thus, the psychological cost of targeting. Thus: H 5 : Providing consumers with a high level of control by allowing them to view and edit their information a) increases their acceptance of behavioral targeting and b) reduces the perceived intrusiveness of targeted advertisements, compared with not allowing them to view and edit their information. 4. Empirical Studies 4.1. Study 1 Design We employed a between-subjects experimental design by administering an online survey with a scenario technique. Respondents were recruited with the help of a professional market research firm and represented the audience of German newspaper websites. The final sample consisted of 469 responses (i.e., 51 completed surveys per manipulation and 61 completed surveys of a control group). First, we presented the respondents a screenshot of a popular German news website and asked them to imagine they were surfing on this website. Then, respondents saw a flash layer overlapping parts of the news website. This flash layer contained a text message with a short greeting ( Dear visitor ) and three paragraphs that represent the experimental conditions (reciprocity, relevance, control). Each paragraph consisted of either a text aiming to increase the acceptance of targeting or a neutral text of similar length and complexity. Respondents then accessed the survey in which they rated their responses to this scenario. We adapted the scales in the questionnaire from prior studies and extensively pretested them to ensure validity and reliability. The paragraphs, the scales, and their respective quality criteria are available upon request from the authors. Respondents were randomly assigned to one of the eight experimental treatments or to a control group. Respondents in the control group saw the news website but no message related to the behavioral targeting of advertisements on the website. They rated the perceived intrusiveness of advertisements not denoted as behaviorally tar- 6

7 geted and answered the respective questions measuring the control variables in our model Study 1 Results Impact of targeting knowledge on perceived intrusiveness. In a first step, we compared the perceived intrusiveness of advertisements shown to respondents in the control group with the perceived intrusiveness of alleged behaviorally targeted advertisements displayed to surfers in scenarios 1 to 8. A t-test revealed that respondents perceived advertisements identified as behaviorally targeted as significantly more intrusive than regular advertisements (T = 2.328, p =.020); regular advertisements received an average intrusiveness rating of 3.602, targeted advertisements received Therefore, H 1 was supported Impact of mechanisms on acceptance and perceived intrusiveness of ads. In a multivariate main analysis, we investigated whether the mechanisms we developed affected the acceptance of targeting and the perceived intrusiveness of targeted advertisements using multivariate analysis of covariance procedures. We included the experimental manipulations reciprocity (present/not present), relevance (present/not present), and the level of control over personal information (high/medium) as independent variables in our model as well as the following covariates: general attitude toward advertising, privacy sensitivity, and perceived utility of the website. Because there were no interactions between the independent variables, our main analyses included overall multivariate results and effect sizes, univariate effects and etasquared values, and post hoc analyses through the Brown Forsythe test. The effect of informing consumers about advertising relevance was not significant after adjusting for the effect of privacy concern, utility of website, and general attitude toward advertising (F =.077, p =.926, η 2 =.000). Accordingly, there were no significant mean differences regarding the acceptance of targeting (Acceptance Relevance = vs. Acceptance No-Relevance = 3.036; Brown Forsythe: F =.649, p =.421) or the perceived intrusiveness of the advertisements on the website (Intrusiveness Relevance = vs. Intrusiveness No-Relevance = 4.101; F =.064, p =.801) between respondents who had been told that targeting would make their advertisements more interesting to them and those who were told that advertisers would like to reach their target group more efficiently. Therefore, H 2a and H 2b were not supported. Regarding the mechanisms of appealing to reciprocity, the omnibus test revealed a significant effect after adjusting for the effect of the control variables (F = 9.919, p <.0001, η 2 =.048). Because reciprocity was a significant factor, we conducted further analyses to examine its effects on the two dependent variables. Follow-up analyses of covariance indicated that reciprocity had a significant effect on the acceptance of targeting operationalized as a provision of an opt-in (F = , p =.001, η 2 =.030) and the perceived intrusiveness of the advertisements shown on the website (F = 8.327, p =.004, η 2 =.021). A post hoc comparison of mean differences between groups suggested that respondents exposed to the reciprocity mechanism had a higher acceptance of targeting (Acceptance Reciprocity = vs. Acceptance No-Reciprocity = 2.619; F = , p =.000) and perceived the advertisements on the website significantly less intrusive (Intrusiveness Reciprocity = vs. Intrusiveness No-Reciprocity = 7

8 4.371; F = , p =.002) than those not exposed to the reciprocity mechanism. Therefore, H 3a and H 3b were supported. H 4 was not supported because there was no significant interaction between the reciprocity and relevance mechanisms (F =.424, p =.655, η 2 =.002). Main effects of the level of control offered to respondents on the two independent variables were significant after controlling for the covariates (F = 3.268, p =.039, η 2 =.016). Univariate analyses indicated that the level of control had a significant effect on the acceptance of targeting (F = 5.515, p =.019, η 2 =.014), which is reflected in the respective mean differences (Acceptance High-Control = vs. Acceptance Moderate- Control = 2.764; Brown Forsythe: F = 4.386, p =.037). Therefore, H 5a was supported. However, the amount of control had no significant effect on the perceived intrusiveness of the advertisements (F = 1.164, p =.281, η 2 =.003), so we did not find any significant mean differences (Intrusiveness High-Control = vs. Intrusiveness Moderate- Control = 4.203; Brown Forsythe: F = 1.070, p =.302). Thus, H 5b was not supported Implications. The core result of Study 1 is that the norm of reciprocity can guide people s behavioral intentions in the context of information privacy and targeted advertising. If a website offering free content makes that norm salient, consumers are significantly more willing to accept targeting. To validate this finding, we conducted a second study in a real-world setting, which enabled us to collect behavioral data Study 2 Design We conducted a between-subjects field experiment in cooperation with a large advertising network. On two German websites, a renowned news website and a query community, we ran a survey that appeared similar to a typical predictive targeting survey. In May 2010, approximately 120,000 visitors of the two websites were invited to participate in the alleged predictive targeting surveys through a small flash layer, with a teaser text appearing when they entered the website. Our manipulation involved showing surfers two teasers, one focusing on relevance and one focusing on reciprocity. Websites running behavioral targeting surveys typically employ a teaser that emphasizes advertising relevance. Thus, our experimental conditions involved the current industry practice (relevance) and an innovative teaser we developed for the study (reciprocity). The teaser texts are available upon request. The manipulated flash layers were displayed to a predefined number of distinct surfers (no repeat visits), with group size being relatively equal within each website (news website: n Scenario1 = 19,566, n Scenario2 = 19,721; query community: n Scenario1 = 40,114, n Scenario2 = 39,900). As is common in predictive targeting surveys, we asked respondents for information regarding their interests in specific products, shopping habits, media usage, and demographic information (e.g., gender, age, profession, and household size), but no personally identifiable information. The dependent variable was acceptance of targeting, which we operationalized as provision of information for targeting purposes. The final number of profiles received is a funnel consisting of (1) the number of surfers who saw the flash layer and clicked on it and (2) the number of surfers who then completed the survey. Therefore, the target variables of Study 2 are the click rate on the flash layer and the response rate, 8

9 defined as percentage of surfers who completed the full survey after clicking on the flash layer Study 2 Results Click rates. On both websites, click rates in Scenario 2 (reciprocity) were substantially higher than those in Scenario 1 (relevance). On the news website, the average click rate moved from.88% using the traditional relevance teaser to 2.1% when we employed the reciprocity mechanism. In the query community, the click rate increased from an average of.46% to.83%. To test whether the differences in the click rates were significant, we performed a chi-square test. The chi-square test yielded a significant association between the text on the flash layer and whether a surfer clicked on the flash layer (news website: χ 2 (1) = , p =.000; query community: χ 2 (1) = , p =.000). The odds ratio shows that surfers exposed to the reciprocity mechanism were 2.4 (news website) and 1.8 (query community) times more likely to participate in the predictive targeting survey than those who had seen the traditional teaser. Thus, these findings provide strong empirical evidence that an appeal to reciprocity positively influences acceptance of targeting, in support of H 3a Response rate. For a higher click rate to result in more profiles, it is important that this effect is not offset by a potential decline in response rates. A comparison of the response rates of the respective scenarios shows that surfers who were exposed to the reciprocity teaser instead of the relevance teaser completed the survey significantly more often after clicking on the flash layer (news website: χ 2 (1) = , p =.000; query community: χ 2 (1) = , p =.000). On the news website, the response rate rose from 19.8% to 39.8%. The odds ratio shows that surfers who clicked on a flash layer containing a reciprocity primer were 2.7 times more likely to complete the survey than those who clicked on a traditionally worded flash layer. For the query community, the response rate rose from 4.3% to 16.6%, implying an odds ratio of Discussion 5.1. Theoretical Implications This article examines privacy concerns in the context of targeted online advertising from a managerial perspective by building on findings from different academic disciplines, in particular, marketing, social psychology, and information systems research. Our research confirms that, in general, consumer privacy concerns have a negative effect not only on the acceptance of targeting but also on consumers attitude toward targeted advertisements because they perceive them as more intrusive than regular advertisements. In their study on targeting and obtrusiveness Goldfarb and Tucker (2011a) suggest that privacy concerns negatively affect advertising effectiveness. Whereas their data do not enable validation by measuring the related latent constructs, our research systematically analyzes the underlying cognitive processes and 9

10 develops tangible mechanisms to alleviate the challenges entailed by privacy concerns. Specifically, we contribute to marketing research in the following ways. First, we find that increasing procedural justice by allowing consumers to view, edit, and delete their information stored on websites results in greater targeting acceptance. As such, our findings confirm Culnan and Armstrong s (1999) work on the role of procedural justice in addressing information privacy concerns. However, we were unable to significantly decrease the perceived intrusiveness of targeted advertisements through this mechanism. This might be because allowing consumers to view and edit their information leads to a more intense elaboration of potential risks and creates a high level of cognitive disruption, a proven source of intrusiveness (McCoy et al., 2008). Second, we were unable to increase consumers acceptance and decrease the perceived intrusiveness of the targeted advertisements by arguing that targeting would make them more interesting. The ineffectiveness of the relevance mechanism is a surprising result because several studies report that many consumers prefer relevant advertisements (McDonald; Cranor, 2010; Turow et al., 2010) and advertisers often use this argument to justify targeting practices and even to collect data for predictive targeting. It seems that consumers do not believe that targeting makes advertisements more interesting or they do not consider highly relevant advertisements sufficiently beneficial. Milne and Gordon s (1993) conjoint study supports this view, showing advertising relevance received a substantially smaller importance weight than compensation. Third, the studies show that in the context of free content, under certain conditions, surfers are highly concerned about distributive justice. Surfers exposed to a blatant reciprocity primer not only are more willing to share data for targeting purposes but also perceive targeted advertisements as less intrusive. As such, the studies show that findings on pay-what-you-want pricing mechanisms (Kim; Natter; Spann, 2009) can be transferred to the online world. Our findings suggest that consumers consider targeted advertising an alternative online currency to voluntarily repay a website for benefits received after they are informed of the challenges related to offering free content. This result is particularly noteworthy because previous research reveals that altruistic, prosocial behavior is often motivated by the desire for status and social acceptance (e.g., Greenberg, 1980; Griskevicius; Tybur; van den Bergh, 2010). In contrast, our studies show that even in a fully anonymous business-to-consumer Internet environment, the idea of a self-oriented, purely rational, utility-maximizing user does not hold true. Therefore, our findings might even be applicable to contexts other than Internet advertising. In general, activating the norm of reciprocity might be a principle to finance for-free online business models. We believe that a core strength of this article is that it validates the findings on consumers willingness to reciprocate online with real behavioral data with an extremely large sample size. We report real click rates, which is rare in academic literature because of confidentiality requirements of most industry partners Managerial Implications Many websites offering predictive behavioral targeting can benefit immediately from our findings related to priming reciprocity by changing their teasers when conducting 10

11 predictive targeting surveys. Doing so would enable them to collect more profiles and thus offer more efficient targeting. In Study 2, we were able to increase the number of completed predictive targeting surveys by 379% and 591%, respectively. Furthermore, Study 1 shows that appealing to reciprocity can increase the number of people choosing to opt-in, or conversely, reduce the number of people opting out of behavioral targeting. In light of our findings, critics might question whether a website should proactively inform its consumers about its targeting practices as long it is not requires by law. In fact, our research shows that surfers who were told that the advertisements shown to them were targeted perceived them as more intrusive than surfers who were not informed. Even with our most effective reciprocity mechanism, we were unable to fully reduce the perceived intrusiveness of targeted advertisements to the level of those not denoted as behaviorally targeted. From a normative and public policy perspective, a website must proactively inform consumers about targeting practices to allow for informed consent (e.g., Dunfee; Smith; Ross Jr., 1999). But also from a purely commercial point of view, doing so seems advisable. Consumers privacy concerns are likely to intensify after they realize that marketers have somehow obtained information about them without their awareness or permission. Our research shows that websites should educate consumers truthfully and comprehensively so that they can make informed trade-offs. This might also reduce increasing regulatory attention and the likelihood of tighter privacy laws being passed Limitations and Further Research Our study has several limitations that, in turn, might open avenues for further research. First, we were only able to test our hypotheses on two websites, a news website and a query community. Additional research could validate our findings in different online environments. Second, both studies were conducted in Germany. Because privacy concerns are related to cultural values and might differ across countries (Milberg; Smith; Burke, 2000), the impact of our mechanisms might differ as well. Third, we were only able to study the short-term effects of increasing the salience of the norm or reciprocity. Therefore, an important area for research would be to study the mid- and long-term effects of reciprocity priming. Regarding the former, research could investigate how long the effect of reciprocity priming on targeting acceptance lasts. Such research would provide insights into how regularly consumers should be reminded of the advantages of targeted advertising to fund free-content websites. Regarding the latter, research could examine the effect of repeated reciprocity priming by several websites. For example, does the effect diminish as consumers become familiar with and thus indifferent to appeals to reciprocity? Or in contrast, does the effect lead to a generally increased awareness of the challenges freecontent websites face? If so, this could lead to a mind-set change regarding consumers willingness to reciprocate benefits or even pay for free online services. 11

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15 Jan H., Schumann, Prof. Dr. Technische Universität München Juniorprofessur für Marketing Arcisstr. 21, Munich, Germany 15