452 THOMAS W. FRICK The personalization of advertising offers firms tremendous potential. If done right, firms can address consumers with more relevant ads, leading to more positive consumer responses. Nevertheless, firms are struggling with how to design personalization strategies and face the challenge to correctly assess advertising effectiveness. With this research, we advance the understanding of advertising personalization The Implications of Advertising and its implications for firms, consumers, and ad platforms. THOMAS W. FRICK - THOMAS W. Personalization for Firms, With the help of a large-scale field experiment, we present evidence for how firms should design their personalization strategies. We find that high levels of personalization specificity pay off for firms. At the same time, socially targeting personalized ads, where names of consumers’ friends are included in the ad Consumers, and Ad Platforms text, leads to less positive consumer responses. To advance the understanding of privacy concerns in advertising personalization, we conduct a lab experiment using eye tracking technology. Our findings reveal that firms cannot use intrusive ads, that The Implications of Advertising Personalization for Firms, Consumers, and Ad Platforms cause privacy concerns, to attract consumers’ attention. Such a strategy is harmful as it decreases consumers’ overall attention towards ads, eventually leading to less positive consumer responses. An examination of contracts between firms and ad platforms exposes that these contracts might not be in the economic interest of firms. We conduct a large field experiment and our analysis reveals that currently implemented contracts between ad platforms and firms lead to an incentive misalignment that is harmful for firms. While ads generally increase consumers’ likelihood to purchase, firms pay more for ads that are not providing higher value to them. The Erasmus Research Institute of Management (ERIM) is the Research School (Onderzoekschool) in the field of management of the Erasmus University Rotterdam. The founding participants of ERIM are the Rotterdam School of Management (RSM), and the Erasmus School of Economics (ESE). ERIM was founded in 1999 and is officially accredited by the Royal Netherlands Academy of Arts and Sciences (KNAW). The research undertaken by ERIM is focused on the management of the firm in its environment, its intra- and interfirm relations, and its business processes in their interdependent connections. The objective of ERIM is to carry out first rate research in management, and to offer an advanced doctoral programme in Research in Management. Within ERIM, over three hundred senior researchers and PhD candidates are active in the different research programmes. From a variety of academic backgrounds and expertises, the ERIM community is united in striving for excellence and working at the forefront of creating new business knowledge. ERIM PhD Series Research in Management Erasmus University Rotterdam (EUR) Erasmus Research Institute of Management Mandeville (T) Building Burgemeester Oudlaan 50 3062 PA Rotterdam, The Netherlands P.O. Box 1738 3000 DR Rotterdam, The Netherlands T +31 10 408 1182 E [email protected] W www.erim.eur.nl The Implications of Advertising Personalization for Firms, Consumers, and Ad Platforms The Implications of Advertising Personalization for Firms, Consumers, and Ad Platforms De implicaties van advertentie personalisatie voor bedrijven, consumenten en advertentieplatforms Thesis to obtain the degree of Doctor from the Erasmus University Rotterdam by command of the rector magnificus Prof.dr. R.C.M.E. Engels and in accordance with the decision of the Doctorate Board The public defense shall be held on Friday, 21st of September 2018 at 11:30 by Thomas Walter Frick born in Hechingen, Germany. Doctoral Committee Promotors: Prof.dr. T. Li Prof.dr.ir. H.W.G.M. van Heck Other members: Prof.dr. P.A. Pavlou Dr. J.M.T. Roos Prof.dr. R. Telang Erasmus Research Institute of Management - ERIM The joint research institute of the Rotterdam School of Management (RSM) and the Erasmus School of Economics (ESE) at the Erasmus University Rotterdam Internet: http://www.erim.eur.nl ERIM Electronic Series Portal: http://repub.eur.nl/ ERIM PhD Series in Research in Management, 452 ERIM reference number: EPS-2018-452-LIS ISBN 978-90-5892-522-0 c 2018, Thomas Walter Frick Design: PanArt www.panart.nl Cover image design: Simone Lilmoes www.simonelilmoes.com This publication (cover and interior) is printed by Tuijtel on recycled paper, BalanceSilk R . The ink used is produced from renewable resources and alcohol free fountain solution. Certifications for the paper and the printing production process: Recycle, EU Ecolabel, FSC R , ISO14001. More info: www.tuijtel.com All rights reserved. No part of this publication may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording, or by any information storage and retrieval system, without permission in writing from the author. Acknowledgements After pretty much six years that I spent on my Master's and PhD, my time in Rotterdam comes to an end. The loose idea of pursuing an academic career had already come up during my Bachelor's. Especially my experiences during my collaborations with Prof Tobias Kretschmer and the members of his department at LMU Munich and my exchange stay at University of Sydney, had nurtured the seed in my head that being an academic might not be that bad after all. But it was only after having completed my Master's in Business Information Management with a, back then, far too ambitious Master's thesis that I decided to go into a PhD program. Now, I have completed this trajectory and there are a lot of people I want to thank for their support along the way. First of all, thank you Ting for being my supervisor. Thank you for giving me a lot of freedom that helped me to develop into a more independent researcher. I always felt you did not shy away from interacting with me as a colleague instead of a subordinate. Eric, thank you for being there for me whenever I needed support. I have learned a lot from you when it comes to how to survive in academia. Thank you for coaching me with my first university teaching assignments. There are several other academics that influenced my academic journey significantly and I am glad to have some of them as members of my PhD committee. Rahul, I cannot thank you enough for hosting me in Pittsburgh in the beginning of 2017. Working with you was in retrospect probably the determining factor that made me decide to pursue an academic career after my PhD. I have learned a tremendous amount from you in such a short time and can only hope that there will be further collaborations in the future to learn even more. Paul, I was truly amazed by your style of collaboration, your extreme kindness, and your academic skills. It is a pleasure and inspiring to work with such an established academic that is so welcoming, friendly and dedicated. I am extremely thankful to the members of my PhD committee for their efforts and support. Jason, thank you for acting as secretary of my PhD committee and providing the marketing perspective on my dissertation. Your feedback was very helpful in vi improving this work. I also want to thank Prof Jan Damsgaard for being a part of my PhD committee (and for giving me a job at Copenhagen Business School). Thanks to Prof Benedict Daellert for being a member of my PhD committee. Two people that supported me tremendously during my PhD project are Maarten and Robert. Thank you for giving me access to actual business data, being true experts in what you are doing, and maybe most importantly, for becoming friends along the way. My gratitude also goes to a lot of colleagues at Rotterdam School of Management. Dimitris, you have been following my journey already as my Master's thesis coach and have become a great friend over time. I will always remember all the fun things we experienced together during our conference travels. I really enjoyed having somebody with a `normal' music taste around. Rodrigo, thanks for being both the go to guy for academic questions as well as for getting a beer in the `Smitse'. Clint, thanks for being a great office mate, having plenty of discussions about academic life, and for being my paranimf. Marcel, thanks for coming back from your US visit just in time to act as my paranimf. I hope that we will share some more great memories in the future. There are plenty of other colleagues to thank and I am running the risk of forgetting some of them. Thank you Mark, Zike, Tobias, Yashar, Otto, Wolf, Ksenia, and Jeffrey for being great colleagues and making the department an amazing place to be around. But how much fun could the life at the Technology and Operations Management department have been without all of the great PhD colleagues. Derck, May, Camill, Timo, Mohammad, Francesco, Davide, Ivo, Micha, Christina, Wouter, Paul, Nick, Sarita, Konstantina, Markus - thank you for making the whole process so much more fun. Very special thanks go to Ingrid, Cheryl, Carmen, and Mirjam for keeping things together in the department. Also a big shout out to the many great PhD colleagues at Carnegie Mellon University that made my research visit so much more fun. Special thanks go to the staff of the Erasmus Research Institute of Management (ERIM) for their support throughout my PhD trajectory. It is difficult to put the gratitude I have for my parents and how they have supported me over all these years into words. Mama und Papa, danke f¨urall die Unterst¨utzung egal in welche Richtung mein Leben sich ¨uber die Jahre entwickelt hat. Ihr wart immer f¨urmich da.