Consumer Privacy Control and Targeted Advertisement on Content Platforms: Resolving the Privacy–Personalization Paradox in Data-Driven Marketing

Abstract

While data-driven targeted advertisement enhances content platform profitability, it exacerbates consumer privacy concerns. Transferring privacy control rights to consumers is considered effective in alleviating consumer privacy concerns but risks reducing data disclosure and subsequently weakening personalized-service utility and advertisement effectiveness. This paper investigates a platform’s strategic motivation to transfer privacy control rights and evaluates its economic implications for platform advertisement strategies, platform profit, consumer surplus and platform–consumer welfare. Our findings show that transferring privacy control rights to consumers increases the advertisement intensity targeted to non-privacy-sensitive consumers, while the advertisement intensity targeted to privacy-sensitive consumers may increase or decrease, depending on the utility loss of personalized service caused by non-disclosure. More importantly, the effects of transferring privacy control rights depend jointly on the utility loss of personalized service and the advertisement-efficiency reduction caused by non-disclosure. When both effects are limited, transferring privacy control rights simultaneously increases platform profit, consumer surplus, and platform–consumer welfare. When the utility loss remains limited but the advertisement-efficiency reduction becomes moderate, consumer surplus and platform–consumer welfare increase while platform profit decreases, indicating that the platform lacks a profit incentive to transfer privacy control rights voluntarily. When either effect becomes sufficiently large, retaining privacy control rights increases platform profit, consumer surplus, and platform–consumer welfare. These findings indicate that transferring privacy control rights can serve as a strategic governance mechanism, but it is not a one-size-fits-all solution to solve the privacy-personalization paradox in data-driven marketing.