AUTHORS' PRE-PRESS VERSION Please cite to the published paper from WPES AUTHORS' PRE-PRESS VERSION Please cite to the published paper from WPES This paper presents empirical data on American Internet users' knowledge about and perceptions of Internet advertising techniques. We present the results of in-depth interviews and an online survey focusing on participants' views of online advertising and their ability to make decisions about privacy tradeoffs. We find users hold misconceptions about

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... purpose of cookies and the effects of clearing them. Only 11% of respondents understood the text description of NAI opt-out cookies, which are a self-help mechanism that enables user choice. 86% believe ads are tailored to websites they have visited in the past, but only 39% believe there are currently ads based on email content, and only 9% think it is ok to see ads based on email content as long as their email service is free. About 20% of participants want the benefits of targeted advertising, but 64% find the idea invasive, and we see signs of a possible chilling effect with 40% self-reporting they would change their online behavior if advertisers were collecting data. We find a gap between people's willingness to pay to protect their privacy and their willingness to accept discounts in exchange for private information. 69% believe privacy is a right and 61% think it is "extortion" to pay to keep their data private. Only 11% say they would pay to avoid ads. We find participants are comfortable with the idea that advertising supports free online content, but they do not believe their data are part of that exchange.