Targeted Online Advertising: Using Reciprocity Appeals to Increase Acceptance among Users of Free Web Services

Abstract

The Internet is dominated by free web services that depend on advertising revenues and powerful marketing tools to support their business models. Targeted online advertising enables websites to increase their advertising revenues by selectively displaying advertisements according to users’ browsing behavior, sociodemographics, and interests. Yet targeting also creates negative consumer reactions, and websites confront increasing regulatory pressures to inform consumers about their practices. It is critical for such advertising-supported websites to address those challenges proactively. In one scenario experiment and two field studies, the authors show that a normative reciprocity argument is generally more effective than the current industry practice of using a utilitarian argument related to advertising relevance to increase acceptance of targeted online advertising. However, in some cases, this dominance switches depending on specific website characteristics such as website utility and level of user-generated content. Managers of free websites should remind their users of the free services they enjoy when asking permission to target them online or to use their personal information.