The impact of ad-blocking on global advertising revenues is growing rapidly. BRIAN ROCK looks at the issue and possible resolutions
Expect a huge increase in ad-blocking on mobile phones.
Apple’s recent upgrade of its mobile phone software to iOS 9, which enables ad-blocking on its Safari browser, has resulted in a massive spike in readers deciding to reject advertising.
More than 600,000 users downloaded ad-blocking apps in the first week after Apple pushed out its new operating system. On September 16, the day of the release, four of the top 10 App Store downloads were ad blockers:
Nine days later Crystal is #2 and Purify is #3.
Although the percentage of Australian downloads from Apple’s App Store has not been quantified, it is likely to be substantial given the Safari’s penetration in Australia. Safari accounts for 56 per cent of mobile browsers in Australia, compared with the 33 per cent globally.
|Mob browser||Aust %|
Source: StatCounter, http://gs.statcounter.com/#mobile_browser-AU-monthly-201408-201508-bar
Ad blocking on iPhones is only part of the problem. Globally 38 per cent of web browsing is on mobiles, with fewer than 2 per cent of mobile owners using ad blockers as of August 2015. The other 98 per cent is on desktops and laptops.
The number of users actively using ad blockers is estimated at 198 million, a 41 per cent increase on last year, according to a report jointly published last month by PageFair and Adobe
Australian ad block usage is in-line with global trends, with dramatic increases over the past two years. In August 2013, 2.05 million Australians used ad blockers each month. By June of this year this increased 81 per cent to 3.73 million, some 18 per cent of monthly internet users.
The introduction of ad blocking to Apple’s iOS, and the amount of press attention it has generated, will accelerate the increase in ad block usage. The question for publishers is how heavily this will bite into revenues, especially in rapidly growing areas such as video ads on mobiles.
Financial impact not trivial
The PageFair / Adobe report estimates a US$21.8 billon hit on the revenue line this year and projects that to rise to US$41.4 billion next year.
The greatest impact is being felt on sites popular with young men. Some 26 per cent of ads on gaming websites are blocked with technical/internet sites (17 per cent) and sport/recreation sites (16 per cent), according to the report. More significantly, it says that 19 per cent of all ads are blocked on social networking sites.
No immediate crisis
Brokerage firm UBS Securities questions the revenue impact cited by PageFair / Adobe, claiming only 0.5 per cent of digital ad revenue would be lost as a result of the Apple move.
Ads in apps aren’t blocked and the Safari ad blockers work only on 64-bit devices, meaning they are useless on iPhone 4s, 5s and earlier 6 models.
Locally, some publishers also question the PageFair / Adobe statistics, saying their internal figures on ad blocking are lower and not growing at the rates extrapolated.
How publishers fight back
Identifying users with ad-blockers is simple and publishers have a range of tactics to deal with them. In the US, the Washington Post and CNET have started withholding content from ad-blocking readers and prompting them to subscribe if they will not switch off their blockers.
Other steps can be taken, such as changing fonts, resizing images and running messages that prompt paid subscriptions as an alternative to receiving ads. Publishers can also limit the number of articles served.
German publishers have headed for the courts but recently lost challenges against Eyeo – creator of AdBlock Plus – on the basis the software breached laws on copyright, competition and market dominance. The US-based Internet Advertising Bureau has also indicated it might mount a legal challenge at some stage.
Another solution is serving ads through apps. Apple’s ad-blocking is currently only activated for web browsers. Not co-incidentally Apple News, which Apple is actively promoting as an advertising platform, is an app.
Relying on apps would favour stronger media players, including Fairfax Media, which has successful tablet and mobile app subscriber lists, and News Corp Australia, which has just launched a reinvigorated digital subscription strategy for its metro dailies. The biggest winners in this environment globally would like be Apple, Google and Facebook.
Another way forward: change the ad experience
A more radical approach is to overhaul the ad experience.
A common justification for ad-blockers is the intrusive nature of some ads, especially pop-ups, page takeovers, and pre-rolls. Tracking data also significantly slows page-loading times, which can be costly for those using mobile data plans.
Eyeo’s stance is that it only intends to block “objectionable” ads and it maintains an “Acceptable Ads Manifesto” website, which calls for ads that “are not annoying” and “do not disrupt or distort the page content we’re trying to read”.
The company has a whitelist of what it calls acceptable ads and users can activate a setting to see these.
Global newspaper body WAN-IFRA has called for publishers to work together to create new approaches to digital advertising and launched an initiative called “Call to Think”.
It says the current model of advertising has degraded the user experience, and “created a downward spiral that will ultimately destroy itself”.
It calls for the industry to develop guiding principles for unobtrusive advertising that will “keep the Web open, that respect consumers and that sustain publishers.”
For more information on ad-blocking read:
- Details of the global newspaper publisher initiative
- Fascinating first-person piece by Marketing Director Charlie Murdoch, who downloaded an ad blocker and couldn’t believe what happened next.
- The perspective of Nic Hodges, Head of Commercial Innovations, News Corp Australia and Founder, Blonde3, who believes ad-blocking to be the most over-hyped internet event since Y2K