Ad blocking battle escalates

While ad blocking software for desktop browsers has been available for years, it hasn’t had a dramatic impact on how publishers monetise ads. However, in the last few months, industry chatter over ad blocking has risen substantially thanks to some new developments from Apple.

Ad blocking comes in a various forms

Earlier this month Apple introduced the latest generation of iPhones, along with a new mobile operating system, iOS 9, which allows ad blocking plug-ins. Within days of the release, ad blocking apps became among the most downloaded category in the Apple App Store. The top selling ad blocker in the iTunes Store is Crystal, a top 10 app selling for $0.99. 1Blocker is a popular alternative which is free with limits or $2.99 for the full feature version.

Typical ad blockers suppress banner ads, popups, and autoplay videos. For end users, the obvious benefit is a less cluttered browsing experience. But there can be secondary benefits as well, like faster page loading, less data usage, and better battery life on their smartphones. 

Google approaches ad blocking differently. Android’s default browser, Google Chrome, doesn’t allow ad-blocking plug-ins, but Android smartphone users have the option to use full browsers, like Adblock Browser (produced by Eyeo GmbH) and Ghostery Privacy Browser, which replace Chrome. Another alternative is to use the Firefox browser then install ad blocking extensions.

Adblock Plus by Eyeo GmbH is a plug-in that encourages users to ‘surf the web without annoying ads’. However, users of the plug-in may not initially realise they will still see ads, just ones that AdBlock Plus deems not annoying. The company’s model involves charging publishers a percentage of ad revenue to be included on a ‘whitelist’ of sites whose ads are not filtered out.

Apple’s new policy has publishers talking

Some see ad blocking as a grave challenge to an established model for content monetisation. Randall Rothenberg, CEO of IAB wrote in Advertising Age, ‘As abetted by for-profit technology companies, ad blocking is robbery, plain and simple — an extortionist scheme that exploits consumer disaffection and risks distorting the economics of democratic capitalism’. He’s asserting consumers who block ads are breaking the social contract in which they agree to be exposed to advertising in exchange for access to free content.

Others see the spike in ad blocking as a wakeup call to the ad industry to make ads less distracting and burdensome to consumers. Forbes recently ran an article titled ‘Apple Ad Blocking Should Be Good News for Publishers’, which argues the model for online advertising isn’t convincing. In particular, use cases for mobile internet access often derive value from commerce, data mining of user behaviour, or other scenarios that don’t rely entirely on user access to otherwise free content.

Apple’s approach to ad blocking shines a light on a key difference between Apple, which generates most of its revenue from hardware, and Google, whose empire is built on advertising. Earlier this year, Apple CEO Tim Cook accused Google of collecting too much consumer data for the purpose of monetising it. While Apple may want to appear the champion of user experience, they have a strategic agenda as well. Apple employs a walled garden ecosystem for their hardware and software, so excluding Google from generating revenue from ads on iOS is appealing (75 per cent of Google’s mobile ad revenue last year was from iOS).

Measuring the effect of ad blocking

According to a report from Adobe and PageFair (a company, akin to Eyeo, that works with publishers to help them deal with ad blocking), the number of global users of ad blocking software grew by 41 per cent in the past year. This average includes a rise of 48 per cent in the US to 45m, and 35 per cent in Europe to 77 m. Within Europe, the adoption of ad blocking varies greatly. Adoption in Greece and Poland exceeds 34 per cent while France and Italy are both below 13 per cent. By factoring in ad spend estimates, the report concludes ad blocking will cost publishers worldwide $22bn this year and nearly double, $41bn, next year. 

Ad blocking also varies significantly by type of site visited. On gaming and social networking sites, ad blocking rates are 27 per cent and 19 per cent, respectively. In contrast, health, dating and real estate sites see only 5 per cent of users employing ad blocking, which is likely a reflection of the age and technical savvy of users, as well as how relevant the ads seem to viewers. 

The report points to Google Chrome on computers as the main driver for the growth of ad blocking. Chrome has continued to increase browser market share (exceeding 25 per cent) and the open platform nature of Chrome makes it easy to install ad block extensions. Notwithstanding the recent media frenzy around mobile ad blocking,mobile devices still account for only a tiny percentage of the ad blocking activity.

Ad blocking hasn’t decimated the online ad business yet and it would be premature to conclude Apple’s recent actions are going to substantially accelerate the impact. This week UBS Securities estimated the annual lost revenue from ad blocking on iOS 9 at around $1bn. Their skepticism of greater repercussions is based on several factors, including in-app ads that aren’t blocked, falling market share of iOS 9 and the Safari Browser, and the fact that many people just don’t want to bother with setting up ad blocking.

What’s a publisher to do?

Some content providers are fighting back by blocking the blockers. Users of ad blocking software who visit the video site Hulu are notified they have to disable the blocking before they are allowed to view content. Other sites are experimenting with alternate models for delivering sponsored messaging. Joe Marchese, president of advanced ad products at Fox Networks Group said, ‘We are definitely looking at different ways to address the issue… But before we say “no, you can’t watch a show”, we want to be able to provide viable options’. For example, some Fox content allows viewers to watch one 60-second ad prior to their show, rather than being interrupted by multiple ads peppered throughout video. 

Instead of creating an ad-blocking standoff between publishers and consumers, there may be more collaborative approaches that create a win for all parties. The IAB’s Rothenberg suggests the ad industry should focus efforts on improving users’ experience by abandoning intrusive and annoying ads and by designing ads that don’t slow down delivery of content with unnecessary preloading of graphics and excessive tracking tags.

Internet advertising as we know it is not at risk of coming to a screeching halt, but publishers need to be smart about how it is deployed. The growth in native advertising is a reminder that well-done advertising improves rather than undermines the user experience.

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