Ad blocking software has figured out native content, threatening the new media economy

Say goodbye to advertising revenue.
Say goodbye to advertising revenue.
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On the ad blocking front, the situation keeps getting worse. Until now, the media industry pretended to ignore the problem, perhaps waiting for a miracle cure. This might turn into a long lull. 

In the coming weeks, a large analytic firm will release disturbing figures on the state of the ad blocking scene. According to someone who has advanced knowledge of the data on desktop computers and critical segments of the digital audience, the use of ad blocking is rising exponentially.

Along with The Netherlands, the German market is by far the most affected one by the ad blocking phenomenon. There, ad block use approaches 40% of the internet population. The reasons for the epidemic are unclear, but two elements are likely to play a role. First, AdBlock Plus (ABP), the most popular ad blocking software, has its roots in Cologne. Second, a cultural factor: German opposition to online advertising, which manifests itself in the government’s obsessive anti-Google stance—pushed by large media conglomerates such as Axel Springer SE.

In France too, ad blocking use is on the rise: about 30% of Gallic internet users are said to have installed extensions that remove banners and other modules, and Millennials (born in 1980-2000) are two times more likely to use an ad blocker. The worst hit are gaming sites, with 80% to 90% of their views deprived of ads. More broadly, the more technophile an audience is, the more likely it is to resort to an ad blocking product.

The US market seems the less affected with 15%-17% of the internet population, again on average, using an ad blocking extension. Among Millennials, the share is said to be twice the average. The UK is said to experience the same pattern.

Altogether, 300 million people in the world have downloaded an ad blocking extension, and about half have actually installed it.

Since my last column on the subject in December 2014—one of our most read Monday Notes ever—several factors have contributed to the phenomenon’s expansion.

  • Technically, Eyeo GmbH, the company that dominates the trade has “improved” in every dimension. In January, the company announced a new feature that allows large scale deployment of Adblock Plus (ABP) in corporate networks. In a few clicks, a system administrator can install ABP on thousands of PCs.
  • Then, in February of this year, competition set in: A previously unknown group of Canadian developers introduced uBlock, a new generation of ad blockers, reported to be faster, with a smaller memory footprint than Eyeo’s extension. Both are now available on every browser and OS.
  • On the legal front, the anti-ad block camp suffered a major blow in April when a court in Hamburg ruled that the ABP extension was indeed legal, a decision that is likely to set a precedent in Germany at least, and possibly the entire EU.
  • The battle is now spreading to mobile. According to an story this month, several major mobile operators intend to deploy ad blockers on their network to put pressure on large mobile ad providers such as Google, Yahoo!, or AOL. They want to protest against what they see as excessive use of their bandwidth by those internet giants. Carriers would benefit from technology developed by Shine Technologies, an Israeli startup. According to Shine’s chief marketing officer Roi Carthy, the proliferation of invasive formats displayed on mobile—popups, auto-play videos—accounts for 10% to 50% of a carrier’s network capacity. Hence the idea to block those ads, no more than an hour per day, to bring the ad providers to the negotiating table. Scores of publishers might get caught in the battle as the three companies aforementioned also served ads on behalf of thousands of media companies…
  • And finally, just last week, Eyeo rolled out a brand new Firefox Mobile Browser for Android with a built-in ad-blocking module. The mobile ecosystem is no longer immune to ravages of the extension

For publishers, ad blockers are the elephant in the room: Everybody sees them, no one talks about them. The common understanding is that the first to speak up will be dead—it will acknowledge that the volume of ads actually delivered can in fact be 30% to 50% smaller than claimed—and invoiced. Publishers fear retaliation from media buying agencies—even though the ad community is quick to forget that it dug its own grave by flooding the web with intolerable amounts of promotional formats.

A week ago, I was in Finland for the Google-sponsored conference Newsgeist. The gathering was setup by Richard Gingras and his Google News team, and by Google’s media team in London. Up there, in a  high-tech campus nested in a birch forest outside Helsinki, about 150 internet people from Europe and the United States were setting the  agenda for what is called an un-conference—as opposed to the usual PowerPoint-saturated format delivered in one-way mode. As expected, one session was devoted to the ad blocking issue. (I can’t quote anyone since discussions took place under the Chatham House Rule).

Everybody agreed: ad blockers have grown exponentially in every market, and are now threatening the whole ecosystem.Their reach now extends to native advertising—which was, until now, relatively spared because native ads can be managed by the publisher’s Content Management System instead of an ad-server. But ABP’s engineers found a way to spot and remove any phrase like “sponsored content” or “sponsored by.” This creates pernicious side-effects, as the user won’t be able to distinguish between commercial and legitimate editorial content on websites. In doing so, the Eyeo people now drift far away from their self-assigned “mission” to protect users from aggressive ads—because branded content is seen by publishers as a credible alternative to invasive formats that disfigure websites. As times passes, Eyeo GmbH now veers into anti-advertising activism—a pragmatic pursuit since it collects millions of euros from large players like Google, Amazon, Microsoft, and Taboola, who all gave in to Eyeo blackmail  in order to have their ads whitelisted.

Publishers are left with few options to respond to the spread of ad blockers

As we saw, lawsuits are not a viable option—the German case is likely to set a precedent, and the European Commission is obsessed with hitting Google hard. In Scandinavia, Schibsted is hard at work on an initiative to raise user awareness, getting many sites to close down access to browsers carrying an ad block extension.

But the most potent response evolves around the idea of changing the commercial relationship between publishers and their customers. They could consider three different kind of deals:

  • Option 1: use an ad blocking extension, and have your preferred site pull various annoying tricks on you that will deny or slow down access.
  • Option 2: opt-in, i.e. register with a valid email address. Yes, you will get ads, but on a selective basis: No autoplay videos, no pop-up windows, etc. From the publisher’s perspective, an opt-in reader is more valuable than an anonymous one, and the loss on the number of formats can be offset by a stiffer rate-card.
  • Option 3: simply subscribe and you get rid of any ads, except for Branded Content, which I see as another form of editorial—not my favorite one, for sure—but carrying the best value for publishers, and less inconvenience for users. Even better, entire sites and apps will load much faster, which is a solid argument when 50% of the audience reads through mobile.

This idea goes with several conditions: news publishers must define themselves as quality-oriented (accepting a lower audience but higher CPMs); they must act in concert; and the ad community must be willing to focus on the quality of the campaign—as opposed to only betting on programmatic selling. None of which is a given.

This post originally appeared at Monday Note.