Effects of Banning Targeted Advertising - by platformpapers
Platform Papers is a monthly blog about platform competition and Big Tech. The blog is linked to platformpapers.com, an online repository that collects and organizes academic research on platform competition.
When using apps on your smartphone, how often do you encounter advertisements suggesting products that you’ve recently viewed online? It’s a bit spooky, isn’t it?
This is known as targeted advertising, a strategy that customizes ads to individual users based on a variety of factors, including their demographic information, browsing behavior, and geographical location. The data is obtained from apps on users’ smartphones and it is often aggregated by third-parties into user profiles.
“[B]anning targeted advertising could deprive developers of an important revenue model, lead to higher prices, less innovation, and, thus, perhaps do more harm than good for consumers.”
People have expressed growing privacy concerns over targeted advertising. Critics have dubbed it “surveillance advertising,” citing its invasive nature, as it often involves extensive data collection without users’ full awareness. Recently, there has been mounting pressure on legislators to ban ad targeting, and policy changes have been put into place to regulate the use of targeted advertisement on platforms, such as the Digital Services Act in the EU. However, developers of apps argue that banning targeted advertising would deprive them of crucial ad revenues necessary for app development. They claim that targeted ads are needed due to users’ reluctance to pay for apps. If true, banning targeted advertising could deprive developers of an important revenue model, lead to higher prices, less innovation, and, thus, perhaps do more harm than good for consumers.
