A deep dive into the accuracy of IP Geolocation Databases and its impact on online advertising

TL;DR

This paper evaluates the accuracy of IP geolocation databases using a large dataset, analyzes their internal limitations, and assesses their economic impact on online advertising, revealing that geolocation can be cost-effective despite lower accuracy.

Contribution

It benchmarks commercial geolocation databases with over 2 billion samples, analyzes their theoretical limits, and studies their economic impact in real-world advertising campaigns.

Findings

Geolocation databases have significant accuracy limitations.

Under certain conditions, IP geolocation can be more cost-effective than GPS.

Theoretical bounds suggest inherent accuracy constraints.

Abstract

The quest for every time more personalized Internet experience relies on the enriched contextual information about each user. Online advertising also follows this approach. Among the context information that advertising stakeholders leverage, location information is certainly one of them. However, when this information is not directly available from the end users, advertising stakeholders infer it using geolocation databases, matching IP addresses to a position on earth. The accuracy of this approach has often been questioned in the past: however, the reality check on an advertising DSP shows that this technique accounts for a large fraction of the served advertisements. In this paper, we revisit the work in the field, that is mostly from almost one decade ago, through the lenses of big data. More specifically, we, i) benchmark two commercial Internet geolocation databases, evaluate the quality of their information using a ground truth database of user positions containing more than 2 billion samples, ii) analyze the internals of these databases, devising a theoretical upper bound for the quality of the Internet geolocation approach, and iii) we run an empirical study that unveils the monetary impact of this technology by considering the costs associated with a real-world ad impressions dataset. We show that when factoring cost in, IP geolocation technology may be, under certain campaign characteristics, a better alternative than GPS from an economic point of view, despite its inferior performance.