Skip to navigationSkip to content

It was a bad year for digital advertising, despite the rise of mobile and the next billion

man with newspapers
Reuters/Anindito Mukherjee
Media is changing.
  • Frédéric Filloux
By Frédéric Filloux

Editor, Monday Note

Published Last updated This article is more than 2 years old.

To wrap up the year, here is a selection of notable shifts observed in 2015, and their expected impact in 2016 on digital advertising, mobile internet, and trends in emerging countries. 

Advertising

It was a terrible year for digital advertising. No matter how media companies tweak their numbers, they won’t be able to hide the truth: the advertising engine is broken; fixing it will require drastic measures that only a few publishers will successfully undertake.

In past months, ad blocking has been all over the news cycle. The phenomenon is growing in every possible dimension. Across the board, the number of ad blocker adopters is rising quickly, especially in tomorrow’s key demographics: the young, tech savvy, likely-to-become-affluent consumers are the ones who massively install ad blockers.

They vote with their mice to reject ads that have become unbearable.

Amazingly, all publishers I met over the last six months acknowledge the problem but, until now, have done little or nothing to solve it. Why? Fear of being the first mover, inability to decide between the short term (with a possible drop in revenue), and the longer view (deriving more income from a better user experience).

As if this wasn’t enough, the ad blocking problem appears much worse in emerging markets. First, the mobile web is much more developed in Asia or Africa than in Western markets where apps dominates usage. Second, mobile bandwidth is way more expensive—hence a greater propensity to do whatever it takes to remove data-hungry ads. As a result, 300 to 400 million people use lightweight browsers such as UC Browser or Maxthon that comes with ad blocking activated by default. Even more worrisome, a handful of cellular carriers currently serving 64 millions subscribers are considering blocking ads right at the source (see this recent Monday Note).

2016 outlook for ad blocking

  • Today’s ad blocker penetration, currently estimated at between 20% and 50% of users, is likely to grow. SourcePoint, one of the many companies who fight ad blockers, estimates that Europe will pass the 50% mark in 2017, with the US market reaching this threshold by 2018. This assumes nothing will be done to contain the trend.
  • The AdBlock Plus extension favored in Europe will continue to proliferate as the awareness of its features expand, and as the number of blacklisted sites and brands grows as a result of massive crowdsourcing.
  • Next year will see the first serious responses from publishers. The simplest and most efficient counter-attack is to deny access to those who use ad blockers. Technically, this isn’t the most difficult part; cleaning-up digital properties beforehand will be harder. That’s where most publishers will balk. Ideally, concerted action could be quite effective but, unlike many other industries (telcos, commodity, energy, construction sectors, you name it…), news publishers are not known for their propensity to seek their best common interest.
  • A growing number of advertising players will negotiate whitelisting with specific ad blockers who, regardless of what they say, are more into the extortion business than they are motivated by consumer well-being. The Outbrains, Taboolas, and Criteos are likely to be followed by many others who will pay the toll, thus delaying sustainable remedies to the problem.

Another critical area: programmatic advertising. However you look at it, for the news industry, the benefit is, to say the least, dubious. Especially for the high value/low audience segment (i.e. quality news sites), that grew used to command high CPMs, as opposed to websites who bet on large audiences and generate barely more than one dollar per year per user.

Here are some significant data for the European market: 73% of the programmatic inventory is traded below $5 CPMs, 44% below $2, and only 13% above $10.

2016 advertising outlook for ads in general

  • Programmatic will continue to thrive. It is dirt cheap, efficient (read: automated), and attractive for sales houses that favor volume over value.
  • Branded content will thrive too, but for a limited number of players—ones who were first to invest in large production facilities (see the last Monday Note, “Industrial Scale Branded Content). They will capture a sizable share of the market. However, the high value branded content segment is structurally limited because of space scarcity on most websites, and because the pool of campaigns is much smaller and harder to get than in traditional commercial operations.
  • The hottest part of the advertising battle will be around increasing the viewability of ads. Current viewability is 39% for news content globally, and 36% in Europe (source: Google). The IAB recommends a rate of 70%. There is much to be done in that field.

Mobile: The need for speed

Mobile users are the most volatile. They relentlessly switch from one service to another, dumping apps right after downloading them, only keeping a few favorites. Altogether, news consumption represents about 10% of time spent on mobile, hence the importance of the following stat: according to Google research, 49% of users will leave a mobile site if it takes longer than six to 10 seconds to load.

During the critical moments of the November attacks in Paris, 70% of access to popular French websites came from mobile devices. On average, most news sites now see more than half of their audience using a mobile. The public has definitely switched. According to eMarketer, American users spend just short of three hours a day on their mobile devices, as compared with only 24 minutes a day in 2010. Mobile is now a platform in itself, with its own rules. The most crucial one is speed. It means optimizing contents in terms of HTML structure as well as editorial formats.

2016 mobile outlook

  • Google’s Accelerated Mobile Page project (AMP) will be a game changer (see our coverage here). While there will be a tough battle with Facebook’s Instant Article and Apple News, AMP already has way more publishers on board that its competitors (details coming soon). Part of the reason is that AMP is open source where others are closed systems. By overhauling HTML, AMP addresses the speed question in the most radical way: an Accelerated Mobile Page is six times lighter in code and loads five times fewer trackers. In addition, it carries all key components for monetization, such as paywalls, analytics, and audience profiling (in addition to various ads formats, of course).
  • The App world will become increasingly complicated as the same code needs to render in dozens of different ways. For example, Apple now has six different flavors of iOS devices, from the iPhone 5s to the stunning iPad Pro (read Jean-Louis’ coverage about it). Similarly, Apple’s 3DTouch prowess grants the iPhone 6s a powerful feature, but also adds another layer of complexity for developers. I’m not sure that the money-tight news industry will follow that costly path, as ultra-light mobile formats such as AMP, Instant Article, or Apple News will change the mobile game.

Emerging countries

The Next Billion (of people connected) is not an empty promise. Dropping prices for handsets and an infrastructure deployed at a fast pace will all contribute to add roughly 600 million mobile subscribers in Asia-Pacific and 400 million in Sub-Saharan Africa in the next four years (source: GSMA). There will be 2.4 billion mobile subscribers by 2020 in Asia and one billion in Africa, not counting machine-to-machine connections.

In time, the smartphone will become the device of choice for knowledge acquisition, news, training, general education, heath, and transaction services. In Africa alone, 400 million smartphones will be activated in the next four years—most of those running Android.

Such growth notwithstanding, some realities needs to be kept in mind. In many emerging and developing countries, the mobile market is completely different from the Western world one. Take data. You and I consume about three to five gigabytes of data each month: email, browsing, apps, maps, etc. We are the 10% of users that generate 55% of global data traffic (source: Ericsson). In many countries, however, very few people can afford to use apps or mapping services. Getting a single gigabyte of data in Indonesia requires 10 hours of work at the minimum wage, 20 hours in India, and 30 hours in Brazil where half of all mobile subscriptions don’t include a data plan. In the next four to five years, data consumption will rise six-fold in these countries, but the price of the megabyte is expected to drop only by half. That sector will need to be creative.

2016 emerging markets outlook

  • Many components of the mobile industry will begin to adjust to the Next Billion’s specific demands: super light websites and apps will proliferate; new business models such as third party billing (sponsoring) will emerge to offset bandwidth costs.
  • Competition between Facebook and Google will intensify. The social network will take advantage of its penetration in many countries where Facebook is seen as the internet, while the search engine will build upon its installed base of 800 million Android-powered smartphones.
  • …And sometime in 2016, Monday Note will launch its Smart4dev Project dedicated to the impact of smartphones on global development.

That’s it for 2016 predictions. In the meantime, I want to thank every reader of Monday Note, which Jean-Louis Gassée and I have been writing for eight years now. We are thrilled to get constant and largely positive feedback for our work.

Merry Christmas, and happy new year to all. I’ll see you in early January.

This post originally appeared at Monday Note.

📬 Kick off each morning with coffee and the Daily Brief (BYO coffee).

By providing your email, you agree to the Quartz Privacy Policy.