Online Advertising, Data Sharing, and Consumer Control

Abstract

We examine how policies for the ownership and control of consumer-generated data affect market outcomes in the online advertising industry. When advertisers have strong property rights over data regarding consumers' active purchase interests, competition between ad exchanges leads to too little sharing of data between advertisers. This harms consumers, who receive too few pertinent ads, and advertisers themselves can also be harmed due to a situation resembling a prisoner's dilemma. We show that giving consumers property rights over their own data can improve outcomes; this happens when consumers can directly share data about their browsing history with ad exchanges. On the other hand, simpler consumer data rights, such as the right to not be tracked, can actually harm consumers due to how ad exchanges respond. Finally, initiatives by Apple and Google to limit third-party tracking, and introduce alternative tracking systems such as FLoCs, can benefit consumers by weakening the property rights of advertisers over consumer data. Because more data is shared by default under such systems, this is true even if these systems are less accurate than the third-party cookie system.