Online Advertising, Identity and Privacy

Privacy and Security, Networks, the Internet, and Cloud Computing and Search and Advertising

Article Snapshot


Randal Picker


University of Chicago Law School Olin Law & Economics Program Working Paper #475, 2009


Argues that changes in how the Internet is used have ramifications for advertising and thus identity and privacy, too.

Policy Relevance

The Internet is moving towards cloud computing and user interaction, which means that the ways content is provided are changing. The shift toward advertising-funded content means that consumer identity and privacy are intimately related to what content is delivered and how much it costs.

Main Points

  • The Internet is now widely available on devices beyond merely desktop PCs and it is now being used for matching and coordination between users.
  • New ways of using the Internet through Google, Facebook and Twitter are heavily weighted toward user interaction. Each user’s clickstream creates data that is especially valuable to advertisers.
  • Advertisers buy the mountains of data created by Google, Facebook and Twitter, and then pay to expose users to their ads. This allows users to access content without having to pay.
  • This model means that advertising is needed to pay for content. This need changes content because advertisers only want to pay for content that is not controversial or that is targeted to demographics that can buy their product.
  • The benefits that consumers receive from not having to pay for content are balanced by their concerns for privacy and the use of their identities. Companies like Google can get information both from use of their general search engine but also from personalized services that provide much more personal information about each user.
  • The wealth of information that companies can collect about their users is a double-edged sword. On one hand it is very valuable to advertisers who will pay to make sure their ads reach a specific audience. On the other hand, the information can identify an individual user and raises privacy concerns.
  • All in all, the information created by new ways of using the Internet is probably a good thing. Online advertising facilitates the correct matching of buyers and sellers, which lowers the cost for consumers and allows them to receive content without paying for it. However, online advertising raises some identity and privacy issues that can and should be addressed through regulation regarding opt-in or opt-out choices for consumers.

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