Targeted advertising and advertising avoidance

Abstract. I examine how the increasing ability of firms to target their advertise-ments to particular individuals influences market outcomes when consumers have access to advertising avoidance tools. Today firms possess an unprecedented and rapidly improving ability to discover details about individuals and reach them with advertising based on this information. For instance, as many readers know, an individual’s web browsing activities may be tracked via information stored in his browser as long as he “participates ” by not regularly deleting it, allowing ads to be customized to him upon visiting a web site.1 Less well known may be that new technology allows Internet Service Providers (ISPs) to target ads by directly tracking which websites consumers visit, meaning that not participating is not an option for consumers.2 Similarly, advances allow cable television operators to deliver highly customized ads to viewers.3 For those who don’t utilize such services, it may be surprising to learn that the many millions of users of social networking tools such as Facebook and MySpace,4 and of the popular email services of firms such as Yahoo and Google, allow ads to be served based on data generated by using the networking tools or gleaned from the contents of emails sent or received. Dunkin’ Donuts is testing new technology that will change the ad displayed at the counter based on the appearance of the customer.5 Supermarkets and other retail outlets are beginning to offer coupons to consumers at the checkout aisle based on their previously recorded shopping habits.6 There are many more examples.