“Too Close for Comfort”: The Negative Effects of Location-Based Advertising

Abstract

The expanding presence of mobile devices offers marketers a new advertis-ing channel for reaching consumers. Whereas both real-world practice and aca-demia hail the advantages of personalizing advertising messages with location information, this research probes its negative effects. An exploratory field study that places ads on a social network reveals a sharp drop in advertising effective-ness when an online ad includes location information. To explain these results, a subsequent experimental study demonstrates how location-based personalization can trigger feelings of vulnerability, which hamper online advertising effective-ness. 2 Introduction The number of people accessing the Internet via a mobile device, such as a smartphone or tablet, has surpassed the number using fixed devices, such as PCs (Gartner, 2012). The time consumers spend using mobile devices also has mul-tiplied, at the expense of traditional media channels such as radio and television. These rapid shifts have been echoed by advertisers, who have shifted their ex-penditures such that mobile advertising captured 22% of U.S. digital advertising expenses in 2013 and is likely to surpass desktop advertising by 2017 (eMarket-er, 2013). The differences between fixed and mobile devices create some new opportunities for marketers, but they also prevent them from easily generalizing the research findings from fixed to mobile online settings (MSI, 2012). Anecdo-tal evidence suggests that typical online advertising strategies are either not applicable or at least demand modification to be effective (Shankar and Bal-asubramanian, 2009). Most advertising research assumes that the effectiveness of online ads de-pends on their benefits for individual consumers. Tailoring advertisements and purchase experiences to individual tastes, on the basis of people's needs, inter-ests, and preferences, is personalization (Chellappa and Sin, 2005). It provides various customer benefits, including better preference matching (Vesanen, I. B. Banks et al.