Targeted Advertising: The Modern Lemons Market

Abstract

Free online content and services are increasingly important to our private, public, and professional lives. The business model which supports these services is the targeted advertising model and it has been hotly debated. However, the debate—which has largely focused on the consumer welfare benefits or lack thereof of the business model—is yet to come to a definitive conclusion on whether the business model should be regulated or not. In this article, I argue that, at present, it is not possible to determine whether targeted advertising increases consumer welfare or not. Nevertheless, I also argue that there is still a ground for regulating targeted advertising—through correcting the information asymmetry that exists between consumers and online platforms.