Can online ad transparency enhance ad effectiveness?

May 2020: We are compiling summaries of state-of-the-art research in ethics at the frontier of technology, following the theme of our 2019 Susilo Symposium. Today, we review insights on online ad transparency by Tami Kim (University of Virginia), Kate Barasz & Leslie K. John (Harvard Business School).

Given the increase in online targeted ads, regulators and consumers are demanding ad transparency – asking online advertiser to reveal how consumers’ personal information was used to generate ads.

Kim and colleagues show that ad transparency decreases ad effectiveness when it exposes unacceptable flows of information, such as when online advisers use cross-website tracking or when consumer attributes are not stated but inferred by the firm. In these situations, consumers are increasingly concerned for their privacy over the interest in ad personalization, thus reducing ad effectiveness.

However, the authors show that ad transparency can enhance ad effectiveness when trusted online platforms disclose acceptable information flows (e.g. information obtained within-website). In two field studies in the context of trusted loyalty programs, Kim and colleagues found that revealing acceptable information flows increased the propensity to click on recommended items.

In conclusion, Kim and colleagues urge online advertisers to (1) stay away from sensitive information (e.g., sexual orientation), (2) commit to at least a minimum amount of transparency, (3) use data judiciously, (4) justify data collection and (5) try traditional data collection first.

The published academic papers can be found here:

Kim, T., Barasz, K., & John, L. K. (2019). Why am I seeing this ad? The effect of ad transparency on ad effectiveness. Journal of Consumer Research, 45(5), 906-932.

John, L. K., Kim, T., & Barasz, K. (2018). Ads that don’t overstep. Harvard Business Review, 96(1), 62-69.

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