Big Data, Differential Pricing, and Advertising

February 18, 2015

On February 6, the White House Council of Economic Advisors released an important report entitled “Big Data and Differential Pricing.”

Differential pricing is the practice of charging customers different prices for the same product, such as senior discounts for movie tickets or tiered pricing for air travel. One of the concerns expressed in the major White House Big Data report that was released last May (“Big Data: Seizing Opportunities, Preserving Values”) was that big data analytics could lead to disparate inequitable treatment, particularly of historically disadvantaged groups.

The Council’s report is a thoughtful, balanced document which describes the evolving technologies and business practices for big data as well as the benefits that differential pricing can provide to both marketers and consumers. There were three important findings worth noting: (1) many companies use big data for targeted marketing, although only a fairly limited number are experimenting with personalized pricing; (2) while concerns about differential pricing in the age of big data remain, many of them can be addressed by enforcing existing anti-discrimination, privacy and consumer protection laws; and (3) providing consumers with increased transparency about how companies use their data would promote more competition and better informed consumer choice.

That’s where the Digital Advertising Alliance (DAA) self-regulatory efforts come in. To address the privacy concerns about interest-based advertising, the marketing community has built one of the most rapidly-growing and successful self-regulatory programs in history. ANA and four other industry groups were founding members of the DAA, which features an icon alerting consumers to the fact that they have been served an ad based on browsing history. When a consumer clicks on this icon, they can access detailed information about interest-based ads and learn how to exercise choice about how to opt-out of targeted ads if they wish to do so.

Since its launch in 2010, the DAA has rapidly brought enhanced notice and choice to consumers:

  • The AdChoices Icon is now served globally trillions of  times each month
  • 37 million unique visitors have visited our two program sites, and
  • 5 million unique users have exercised an opt-out choice on our Consumer Choice Page
  • The program is now expanding to cover mobile media

We have encouraged all of our members to join the DAA program.

The Council’s report suggests that “policies to prevent inequitable application of big data should focus on risk-based pricing in high-stakes markets such as employment, insurance or credit provision.” That is consistent with the DAA program, which explicitly forbids data collected for OBA purposes to be used for job, insurance, mortgages and other similar sensitive purposes. 

The report was an encouraging and positive first look at complex issues including the positive aspects of differential pricing and some reasonable approaches to mitigate these risks. These issues are sufficiently important that they are sure to continue to receive the careful consideration of policymakers and the ad community for the foreseeable future.  

comments (1)

mohamed fawzy

February 25, 2015 6:17am ET

online advertising is the future of marketing.
all companies now are interested in e marketing and online advertising so the spent big budget for it .

You must be logged in to submit a comment.