Taking the long view, the rise of ad blockers solves many problems for the digital news industry… But for one problem: things will get worse before they get better.
In recent weeks, the intensifying ad blockers debate offered another proof of Apple’s influence on the digital ecosystem. When Tim Cook introduced content-blocking features in iOS 9, and thus caused a flood of ad-blocking apps in the App Store, the topic became more mainstream than ever. Ad blocker adoption rose to never-seen-before levels. (A reminder of the most recent data: PageFair says that between 8% and 16% of ads are blocked in the US, vs. 10% to 35% in Europe; SecretMedia says that 26% of video ads are blocked in the US vs. 33% to 62% in Europe; more in our previous stories on the subject.) PageFair figures vastly underestimate the problem. In a recent poll, The Information (paywall) found that 50% of respondents already used an ad blocker and that 52% intended to install one on their iPhone.
The propagation to mobile will dramatically scale up ad blocker use.
First, on mobile devices, users tend to reject ads even more than on desktops.
The second factor involves bandwidth usage: through their data plans, users are actually taxed by intrusive ads. Some carrier plans—usually the most expensive ones—might include unlimited data. But “unlimited” doesn’t usually work when roaming; bit-guzzling apps prove costly when traveling abroad. Besides the monetary impact, the ad blocking benefit experienced in navigation, comfort and speed is way more tangible on a mobile device than on the desktop. For example, according to tests performed by BrooksReview, the loading time gain on New York Times mobile pages is 6x. No wonder ad blocking apps are such a hit in the AppStore.
The consequences of massive ad blocker adoption on desktop and mobile is twofold.
First, it further reinforces Facebook’s power. In the US market, according to Pew Research, Zuckerberg’s company already commands 24% of digital display ads and 37% on mobile. The way Facebook’s ads are structured makes them less vulnerable to ad blockers than most web sites. For Google (14% of the US display market and 12% on mobile), the story is different because its ads are generally easier to block, clearly putting the search giant in the cross hairs of Apple’s ad blocking offensive. Even before Apple’s iOS 9 content-blocking, Google shot itself in the foot by allowing Adblock Plus (ABP), the most popular ad blocker, to build an extension in Chrome. As discussed in a previous Monday Note, out of 44,000 filters compiled in ABP’s database, more than 1,200 target Google alone (907 for Google itself, 232 for its DFP ad server and 65 for YouTube). I asked several Google employees why the company let the fox in the henhouse. The unanimous answer: Engineers call the shots, here; management’s steering wheel is not necessarily connected to the front wheels. The engineering body decided the libertarian view ought to prevail, everyone else bowed.
In a digital advertising sector that has been facing a long, relentless devastation, ad blockers are only a part of the problem. In a worth-reading investigative piece, Bloomberg Business Week exposes the scope of the fake traffic industry. The article mentions this research on fraud’s impact on advertising.
To sum up: Bots accounts for 11% of display ads impressions, 23% of video ads impressions, 17% of programmatic inventory, 19% of retargeted ads and 52% of in-source traffic (traffic acquired through third parties). The most affected categories are Finance, Family and Food sites (between 16% and 22% of ad impressions come from bots). News sites, usually less ad-loaded, see 4% of their ad clicks coming from robots. Four percent of fake ad impressions might not seem much, but the loss of revenue is much higher because the highest CPM-carrying formats are the ones that suffer the most.
Ad blockers and bots both rose together as a consequence of the advertising industry’s carelessness and short-sighted greed. Obsessed with maximizing their profits, advertisers and media buying agencies developed a vast apparatus: programmatic tools, which carry low single-digit CPMs (in the best of cases); ad exchanges that send repackaged users profiles to platforms that match them to ad formats; retargeting systems that track users, displaying over and over the same ads on every site visited after a search. The latter maneuver yields predictable results: tracking excesses generate the same negative perception as intrusive ads and stimulate ad blocker installation. (On this, see a previous column: 20 Home Pages, 500 Trackers Loaded: Media Succumbs to Monitoring Frenzy.) By the way, users do not feel guilty using ad blockers or anti-tracking systems. According to the aforementioned The Information survey, less than 9% of users who deploy blocking tools experience some kind of guilt feeling.
The advertising community can now brace for a double whammy: from a public that will increasingly draw on an expanding arsenal of ad-blocking and anti-tracking tools; and from advertisers opening their eyes to the vast scope of cheating. That’s why many predict a huge impact on the digital economy.
Now, if we take the long view and focus on the segment of high quality news content, current abuses could clear up the landscape in several positive ways.
- At some point, all ecosystem components (advertisers, creative agencies, media buyers, marketplaces, publishers) will need to congregate and come up with acceptable ad formats, as well as reasonable tracking practices. For now, they appear numb, but the combined pressure of quarterly earnings and antsy customers will force change.
- Low-end formats will disappear from the web, to the benefit of rarer, more sophisticated ads such as bespoke contents. In the process, most bottom-feeding intermediaries should vanish, with remaining ones adding real value.
- Paid-for models for news will gain in popularity, with paywalls, memberships, or other systems. The trade-off will be clear: you pay something and you’re spared ads and abusive tracking. Or, to a lesser extent, you’ll be served with non-intrusive ads.
- This will clearly favor micro-payment systems. In that field, the standard is up for grabs: the first company to crack the code for a friction-free small transactions system for news content will make a killing. Dutch company Blendle ambitions to be that one – more on this next week.
This process will come with a cost. It will take time to set things in motion as there are many players and technologies not quite aligned—yet. And, we haven’t yet hit the bottom of the J curve, we still aren’t done with the Big Advertising Deflation.