Personalization of ads and services

Personalization of ads and services

Consumers are nowadays exposed to various personalized content – from personalized political messages, through social media posts and search results, to movies or music. Such personalization is possible with vast amounts of consumers’ personal data that companies collect and use to train algorithms which are able to predict consumers’ likes, clicks, purchases or voting decisions.

In the EU, for such data collection and processing to be lawful, a company needs to meet the GDPR requirements. When drafting GDPR provisions, the legislator tried to strike a balance between protection of consumers’ autonomy when deciding about their privacy and the interest of the companies as well as the public in the ability to collect and use personal data to develop better products and services. This balance was achieved through various rules and principles such as privacy by design or a list of legal bases for data collection and processing with consent being one of them. When collecting and processing consumers’ personal data, businesses need to make sure that they rely on an appropriate legal basis. However, the choice of a legal basis to rely on when collecting and processing consumer personal data for personalization purposes is not that straightforward. In principle, companies that implement personalization could rely either on consumer consent or on a contract with a consumer if personalization is part of the service that the consumer agreed to be provided with. Differentiating between the two legal bases is particularly important in case of services offered to consumers at a zero price that rely on personalized (i.e., targeted or behavioral) advertising for their revenue. Obtaining consumer consent will most likely diminish the number of consumers whose data will be collected and who could be shown with personalized advertisement, thus potentially decreasing the income of a company relying on such a business model. At the same time, relying on a contract as a legal basis deprives consumers of the control over their data which they can exercise when the collection and processing is based on their consent. 

The question I address in this project, working together with Daria Baltag, an alumni of the European School of Law at Maastricht University, is whether this distinction matters for consumers, i.e., do consumers differentiate between collection and processing of their data for personalized advertisement and personalized services? Does this distinction depend on whether the service is provided for free and thus, advertisement is needed for the service to be offered at a zero price?

To answer those questions we conducted an experimental vignette study where we presented participants with hypothetical scenarios describing an offer of a music streaming mobile application. Participants were assigned to four groups. One group read that the app is free and that users’ data are collected to personalize services. The other group read that the app is free but users’ data are collected to personalize advertisement. Importantly, the content of personalized services and advertisement did not differ – in both cases users would receive suggestions of new artists and songs. The other two groups were informed that the app costs €9.99/month and either include personalized advertisement or personalized services.

Scenario describing an offer for a music streaming application. In this scenario, participants read that the offer is free and it collects their data to personalize services.

Once participants got familiar with the scenario we asked them two main questions: how willing they are to use the app and how willing they are to share their data with the app. The results revealed that the type of personalization (advertisement vs. service) does not impact participants’ willingness to use the app and share their data with it. We did not observe any differences between the two types of personalization regardless of the price of the app. This means that participants do not distinguish between the two types of personalization that do have different legal implications and that this holds regardless of whether the app is free or not. Importantly, the price itself does matter for participants – they are, in general, more willing to share their data with free than with paid apps. It is likely that participants do perceive their data as counter performance and are fine to share it for personalization purposes (both advertisement and services) as long as they receive free services in exchange.

To test whether this generalize across various types of mobile applications, we conducted two further experiments. This time participants read offers of a shopping mobile app and a news mobile app. The manipulation with price and the type of personalization was similar to the previous scenario. We again found no impact of the type of personalization on the willingness to share personal information with the apps. As in the first study, this holds for both – free and paid apps. The results showed only the general effect of the price on the willingness to share personal data with the app – participants were more willing to share their data with a free than with a paid app.

Main results from three studies – with music, shopping and news apps. The graph shows the distribution of responses to the question asking about the willingness to share personal information with the app on a scale from 1 (extremely unwilling) to 7 (extremely willing).

All studies (hypotheses, design and planned analyses) were pre-registered on Open Science Framework. There, you can also find the scenarios of news and shopping apps.