Ad blockers deny publishers vital income for content creation

Ad blockers are essential at the moment, but the need for such software will diminish as the barriers between publishers and consumers dissolve

It's difficult to avoid advertising hoardings like those at London's Piccadilly Circus, but with ad blockers, consumers can block out digital adverts. It's an increasingly common practice, and one that is hurting publishers

Adverts are everywhere and the majority of them are unavoidable: they are placed on billboards at the side of the road; they are found smack bang in the middle of people’s favourite TV shows, magazines and newspapers; they are plastered on the sides of buses and inside the carriages of trains. The only way to avoid them is to avert one’s eyes, which can be a challenge in itself, as advertisers have become extremely good at grabbing the attention of consumers.

There is one place, however, where people can fight back against the onslaught of adverts, and that is online. With the help of ad-blocking software installed on their smartphone or web browser, users can have a relatively ad-free experience as they peruse diverse content on different websites.

On the surface at least, having the option to block ads seems like a win-win for consumers tired of being bombarded with pop-ups and banners. But it is a little more complicated than that, as, by cutting out advertisements online, consumers are also destroying content providers’ ability to access ad revenue – something they desperately need if they are to continue producing the high-quality content their users love.

And if that wasn’t bad enough, adding to publishers’ problems are the ad-blocking companies, which are looking to take a cut of content providers’ already limited revenue streams.

Advertising is one of the core principles of any publisher’s business model. Publishing is all about creating content and selling advertising at a price based on the quality of said content

There are various suppliers of ad-blocking software: the aptly-named uBlock; AdBlock (which was recently sold to a mystery buyer, with the company refusing to name its new owner); and Adblock Plus, which is the biggest of the three. The last is a for-profit company and it manages to make its money by approaching publishers whose websites deliver ads in a manner it deems acceptable. It then offers these publishers the opportunity to apply to go on its ‘whitelist’ – meaning Adblock Plus will let specific ads through, so long as they meet certain criteria.

This service naturally comes at a price, and a hefty one at that. Adblock Plus will charge publishers up to 30 percent of their ad revenue just for the privilege of being a member of their whitelist. Many publishers are annoyed by this setup, with some claiming (such as technology site Ars Technica) it diverts funding away from content producers, many of which are struggling to keep their heads above water as it is.

Advertising is one of the core principles of any publisher’s business model. Publishing is all about creating content and selling advertising at a price based on the quality of said content (or selling advertorials to make up the difference), or, if there is enough demand for the content created, publishers can sell it at a premium via a monthly subscription, and thus (at least partly) remove the need for ad revenue.

There is no free lunch here. Hence, a piece of software that is capable of completely gutting the revenue stream from the publishing industry, while simultaneously providing consumers with the content they crave, is effectively holding publishers to ransom. At least, that was the opinion of Mike Zaneis, a Vice President of the Interactive Advertising Bureau in an interview he gave to CNET.

“Ad blocking to me is so fundamentally wrong; it just boils my blood”, he said. “It’s a huge economic problem for the industry, one the industry is just coming to grips with and to see as the fundamental threat that it is. For some publishers, itís a blip on the radar screen – less than five percent of users or ads are being blocked. That’s what we in the business call a discrepancy: it’s not that big a differential.”

But Zaneis was quick to point out that, for smaller publishers, especially those with a “young, tech-savvy audience”, more than half their users can be running ad blockers. The software has the potential to utterly crush their business.

Online publishers are clearly stuck in a rather precarious position, but all is not lost. Many publishers are realising that, by listening to consumers and improving their ad experience online, while also finding innovative ways to communicate to their users that advertising is essential to keeping the content they love free, the tide is starting to turn in their favour – stripping ad blockers of the power they have held over the online publishing industry in the process.

The adblockalypse
PageFair is a leading provider of counter-ad-block solutions; it helps online publishers identify users who actively use ad-blocking software, as well as assisting them in calculating and recovering the revenue lost as a consequence.

In the company’s 2015 Ad Blocking Report, it found that, globally, ad blocking cost publishers more than $22bn last year and that there were over 198 million active users of ad block software worldwide. Those numbers are set to rise unless something is done to counteract them, as, between 2014 and 2015, ad blocking grew by 41 percent globally, with the US seeing an increase of 48 percent (45 million active users) in the 12 months from June 2014. Statistics such as this have led some to some fear the online publishing industry is on the verge of an ‘adblockalypse’.

In the UK, however, research conducted by the Internet Advertising Bureau (IAB) revealed just 18 percent of all British adults online were using some form of ad-blocking software last November – up from 15 percent in early June, showing linear, rather than exponential, growth in ad blocking. The IAB study was more comprehensive than the one carried out by PageFair as it didn’t just look at the size and scale of ad blocking, it was also interested in identifying the main drivers behind people’s propensity to block adverts online.

Interestingly, the organisation found that, while 57 percent of those surveyed said the main reason they chose to use such software was to block all ads, the remaining 40 percent admitted they were more concerned with ensuring specific ads were blocked – ones they found particularly annoying and which negatively impacted their experience on the web.

Some publishers have opted to prevent users of ad blockers viewing their content altogether

Guy Phillipson, CEO of IAB said the issue of ad blocking is less acute among quality publishers and big-name news portals, but that long-tail publishers and local news sites, which tend deliver ads through techniques such as overlays and pop-ups, suffer a lot at the hands of the software.

“The small rise in people blocking ads is not unexpected considering the publicity it’s been receiving”, said Phillipson in a statement. “However, it does provide some perspective on the situation for those referring to an adblockalypse.”

“More importantly, it also provides a clear message to the industry – a less invasive, lighter ad experience is absolutely vital to address the main cause of ad blocking. That’s why we’re developing the LEAN [Light, Encrypted, Ad choice supported and Non-invasive] advertising principles for the online advertising supply chain.”

The principles proposed by IAB aim to strike a balance between consumers wanting a quality experience online and publishers’ need for valuable ad revenue. The organisation is advising publishers to make ads that are lighter in terms of file size and make fewer data calls; the latter in particular slow down websites and upset users who are worried about issues of privacy. IAB has also advised its members they should attempt to remove as many overlays as possible and ensure video advertising does not automatically play with the sound turned on. According to Phillipson, by getting rid of these types of advertisements, publishers will give consumers fewer reasons to employ ad-blocking software.

No ad-free lunch
Not only does the online publishing industry have to rethink the way it delivers ads, it must do a better job of communicating to consumers that the content they love is only free to them because of the revenue generated by the advertising they hate.

“There are two statistics that I think are quite interesting”, said Phillipson. “When we asked consumers ‘Did you realise that the advertising is paying for the content that you want to see?’ 56 percent of people said they weren’t aware of that fact. They didn’t realise that advertising funds the content that they love.”

In its survey, IAB also asked consumers: ‘Would you be willing to pay for this experience without advertising?’ Only four percent of those surveyed said they would. “It is quite clear then that the ad-blocking community wants to have its cake and eat it too”, said Phillipson,”as, for the moment at least, they are neither willing to pay a premium for ad-free content, nor allow any ads through.” For Phillipson, the more people who realise content is only free because ads pay for it, the fewer who will block them.

A number of online news sites have already started to test methods of communicating this message to their readers. Some publishers have opted to prevent users of ad blockers viewing their content altogether. On the website of City AM, London’s daily financial freesheet, users of ad-blocking software are met with the message: “As City AM relies on advertising to fund its journalism, please disable any ad blockers from running on to see the rest of this content.”

The newspaper’s Digital Editor, Martin Ashplant, told The Guardian: “As an ad-funded organisation, the ability to serve adverts around this content is crucial to us continuing to provide it for free to our users. We hope that by making it clear to people that ad blocking hurts our ability to do this they will choose to turn ad blockers off on, even if they decide to continue using them elsewhere.”

Similar tests are being conducted all over the world. In Germany, Axel Springer, one of the largest digital publishing house in Europe, chose to ban its readers from using ad blockers on its Bild tabloid website. Its approach differed slightly to City AM, however, with the site asking its users to turn off their ad blocker or pay a monthly subscription fee to browse its content mostly ad-free.

Publishers have been slow to react to changing consumer habits

The efforts of these various publishers to better communicate the value exchange that is occurring when people consume content is extremely important, but in order to apply IAB’s LEAN principles and improve the overall experience for consumers, publishers are going to have to invest a considerable amount of money in their websites. The cost of making these changes has deterred some publishers, though the extent of the problem, and what they stand to gain by addressing it, definitely outweigh the argument for inaction.

According to Phillipson, when representatives from the The Guardian gave a presentation to advertisers at the IAB Upfront event, they explained that less is more when it comes to ads. In fact, their website is one of the quickest to load on mobile devices because they limit the size of, and data calls in, ads to a bare minimum.

“I’m sure others will follow their lead”, said Phillipson. “They kind of have too. Within the publishing community, I haven’t yet had a conversation with anyone who has said ‘I’m sorry, we have to keep serving overlaying advertising because it’s making us money’.”

Blocking the blockers
From the data provided by IAB and PageFair, it is clear publishers have been slow to react to changing consumer habits, leaving data-heavy, poorly delivered adverts to run rampant online. By failing to communicate to their audiences that advertising is a necessary evil if they wish to view content free of charge, publishers have forced consumers to turn elsewhere in order to have their demands met.

By neglecting to address the issues surrounding online advertising for so long, publishers have opened the doors for third-parties to find solutions on their behalf, and ones that are not to the industry’s liking. Ad blockers, while managing to improve the overall internet experience for their users, are now threatening the producers of the content their users log on for in the first place.

Thankfully, both parties are slowly realising ad blocking is a zero sum game. Combine this with the fact that publishers now know they must streamline the ad experience in order to meet the demands of their users (who are willing to accept certain types of ads) and it becomes easy to envisage an industry that, rather than being on the verge of an adblockalypse, is capable of bringing about the demise of the ad blockers.

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