ellipsis flag icon-blogicon-check icon-comments icon-email icon-error icon-facebook icon-follow-comment icon-googleicon-hamburger icon-imedia-blog icon-imediaicon-instagramicon-left-arrow icon-linked-in icon-linked icon-linkedin icon-multi-page-view icon-person icon-print icon-right-arrow icon-save icon-searchicon-share-arrow icon-single-page-view icon-tag icon-twitter icon-unfollow icon-upload icon-valid icon-video-play icon-views icon-website icon-youtubelogo-imedia-white logo-imedia logo-mediaWhite review-star thumbs_down thumbs_up

How ad blocking will change digital advertising

How ad blocking will change digital advertising Kent Lewis
VIEW SINGLE PAGE
One of the marketing industry's darkest secrets is finally coming to light: Consumers dislike online advertising and would prefer not to see it at all. For years, a fringe group of tech-savvy consumers utilized ad-blocking software to create an ad-free online experience (ranging from reading magazines to gaming). In the past year or so, that has begun to change. Ad blocking is going mainstream, most recently with the Apple announcement of ad blocking capabilities native in iOS 9. Although the initial impact is not yet known, the long-term result will likely force the hand of online publishers, agencies, and brands to change the way they advertise across the digital landscape. In this article, I'll explore exactly how ad blocking will change the digital advertising industry -- for the better.


To frame up the impact of ad blockers on the publishing and advertising industry, here are a few impactful statistics:



  • According to a report from Adobe and PageFair, 144 million monthly active users (roughly 5 percent of the internet population) have adopted ad-blocking technology globally.

  • The use of ad blockers increased 69 percent over the last 12 months.

  • Ad blocking is now prevalent across all verticals, not just in tech, video games, or European markets (up to 25 percent in some countries, 20 percent in Germany and Austria).

  • While ad-blocking rates are highest among video game (30 to 50 percent) and technology (25 percent) sites, the rates among publishers in business news (15 to 20 percent), entertainment (15 percent), and sports news (10 to 15 percent) are also on the rise.

  • Fifty-four percent of men between 18 and 29 use ad-blocking software (the high water mark across all demographics).

  • According to Eyeo, the maker of the most widely used ad blocker software, Adblock Plus has been downloaded more than 400 million times and has 50 to 60 million active monthly users.

  • ProSiebenSat.1, a German media group, indicated that the practice of ad blocking cost it "9.2m ($10.4 million) in 2014 -- around 20 percent of its web revenues.


Consumer motivations


The impact of ad blocking will be felt across a variety of audiences, but it will be primarily driven by consumer adoption of ad blocking software. Consumers value privacy and free internet, but they are increasingly impatient with advertising and are looking for options. Consumers are getting more savvy, and technology evolved to reach an inflection point last year, resulting in massive adoption growth rates for easy-to-install ad blockers. Technology-savvy consumers are not alone in the adoption of ad blockers; Millennials as a whole reject disruptive advertising.


Ad blockers typically live in the browsers, like those provided by UC Browser and Eyeo. Ad blocking has moved to the mobile networks as well, with platforms like Shine. Ad blocker growth is significant on mobile devices due to privacy concerns and an ad server's tendency to drain battery life. While mobile makes up roughly 25 percent of online ad spend today, it will continue to be the highest growth channel, which means bigger challenges for publishers.

Publishers and advertisers fight back


Publishers are increasingly threatened by the potential loss of revenue, while advertisers are concerned about reduced visibility and wasted spend. The problem has gotten so big that German publishers sued the creator of Adblock Plus earlier this year for lost revenues. French publishers are considering doing the same. The courts have favored Eyeo so far, however. This trend may lead to a larger contingent of publishers, advertisers, and brands forming a lobby group to eradicate the technology.


Some publishers are not outwardly worried about the impact of ad blockers and are conducting business as usual. Some publishers are uncertain of the future and are doubling-down on short-term revenue maximization by adding new inventory, including auto-play videos, welcome ads, takeovers, pop-ups, and page wraps. I predict this short-term strategy will fail in a big way as consumers become frustrated and advertisers see a drop in performance.


Many more publishers are taking a stand and have developed a multi-pronged strategy to mitigate the impact of ad blockers. The softest approach is to educate ad blocker users regarding the impact of the lost revenue to the publishers and request they whitelist the website which enables the ads. Wired and Mixcloud and others have seen success with this approach. Another approach is to create a paywall (a system that prevents internet users from accessing webpage content without a paid subscription) for users in order to skip the advertising all together. YouTube and The Next Web are planning to take this approach.


A fringe group of publishers are taking a hardline approach to prevent ad blocker users from accessing content. Video streaming sites like Hulu have taken this approach, as have UK's ITV and Channel 4. The downside to this approach is that ad blockers eventually find workarounds, and the publishers tend to lose visitors to competitive websites. Other publishers are utilizing technology to subvert ad blockers, including tweaking URLs and using shorteners. This is, of course, a cat-and-mouse game that will be difficult for either publishers or ad blockers to win. Publishers have the most to lose by not making changes, however.


Vendors have sprung up to take advantage of the evolving ad blocker industry. PageFair measures how many people block ads on publisher sites and allows publishers to display discreet ads to ad-block software users through the platform. Secret Media uses a "polymorphic encryption algorithm" to accomplish the same task. Companies like Sourcepoint provide a content compensation platform to address ad recovery for advertisers and publishers.


Big players like Microsoft and Google are taking a strategic approach by paying to get their ads whitelisted by default within the Adblock Plus software. This is ironic on two levels: advertising platforms paying to avoid getting their ads blocked by third parties and the fact that default blocking of ads creates a moral dilemma. By definition, default ad blocking would violate the principle of network neutrality, which holds that internet providers should treat all types of traffic equally. The conversations are just getting started on this front.


The smartest approach, in my humble opinion, is to improve the user experience with smarter and more user-friendly layouts, ad formats (i.e. native advertising, video, and cinemagraphs), and generally reducing the number of ad options. The idea is that attention will be divided among fewer ads and improve performance. The publisher can also charge more for each ad, and the brands and agencies can spend more time developing compelling creative. Advertisers may migrate to other (social) platforms and solutions, including Facebook and Twitter feeds.

Conclusion


While not hugely impactful for the majority of advertisers and publishers at the moment, widespread adoption of ad blockers driven by the motivations of consumers will force change in the world of digital advertising. I and my team at Anvil believe these changes will be for the better, as it will force advertisers and agencies to be more creative in generating messaging that better integrates with the user experience and more directly relates to the target audience. With the evolution of ad blockers and publisher solutions, consumers will be better informed and empowered to make choices, advertisers will up their game, and it will all gain momentum with Apple's ad-blocker capabilities coming soon in iOS 9. The online advertising landscape continues to evolve, but the future of online advertising doesn't have to be scary.


Resources



Kent Lewis is president and founder of Anvil Media.


On Twitter? Follow iMedia Connection at @iMediaTweet.



"Stop ADS -- Red Sign Painted" image via Shutterstock.

With a background in integrated marketing, Lewis left a public relations agency in 1996 to start his career in search engine marketing. Since then, he’s helped grow businesses by connecting his clients with their constituents via the...

View full biography

Comments

to leave comments.