Category: Retail & eCommerce

“Ad-pocalypse Now? I Think Not!” exclaimed Steve Chester, Director of Data and Industry Programmes at the Internet Advertising Bureau (IAB UK). Adblocking is the cause of huge headaches for internet publishers, gaming companies and advertisers.

It’s a huge problem and many in the industry think that it’s immoral, illegal, anti free speech and is killing journalism. Some also point to one positive that was spawned by adblocking, making sites leaner and more enjoyable to the consumer. Adblocking has forced publishers and advertisers, however unfairly, to own up to their own faults.

This report is designed to bring perspective to the rise of adblockers and how they are impacting the internet ecosystem and what the future is likely to bring.

Some in the industry are exasperated that we continue to let adblockers have such a negative impact on publishing and advertising.

“The reason it has to happen is just like video didn’t kill the radio star and just like Netflix hasn’t killed live TV and just like Napster never killed music, adblocking will not be allowed to kill journalism,” stated Anna Hickey, Managing Director Maxus UK at the 2016 Shift conference. “Journalism is too important to us culturally and economically and we all have our part to play in making sure that it survives.”

“Why did we lose track of user experience?” asks IAB President Randall Rothenberg. “For much of the past decade, the digital ad industry, aided and abetted by venture capitalists with no long-term stake in the viability of media and marketing businesses, have been in a headlong rush to subvert industry standards, hoping they can own the single business model that can lock in proprietary advantage and lock out competitors in the $600 billion global ad industry.”

As Much as 40% of Ads Are Blocked

“Where is it heading and will it actually be more of a storm in a teacup when we look back on this or is it the beginning of a major reform of the advertising ecosystem?” asked Rufus Olins, CEO at Newsworks, a UK based marketing body for national newspapers. “Adblocking is a key topic for this industry and it continues to develop as an issue not just in the UK but around the world.”

A March 2016 IAB/YouGov study on the state of ad blocking in the U.K. shows that 22% of British adults currently use adblocking software, up from 18% in their Oct. 2015 study. According to “The Cost of Ad Blocking” 2015 report by PageFair and Adobe (PDF), 16% of the US online population blocked ads during Q2 2015, which is just slightly less than in the UK, and at this point in August 2016 is likely the same or higher than the UK.

An IAB study in 2014 paints a much grimmer picture, concluding that over a third of US users, and 41% of Millennials, had installed ad-blocking software. The main reason people was a concern that advertising could infect their computers or smartphones with viruses. However, more than two-thirds also believed that advertising slowed interrupted their online experience and slowed them down.

40% THINK They’re Using an Ad Blocker, 26% Actually Are

According to a July 2016 IAB report, “Ad Blocking: Who Blocks Ads, Why and How to Win Them Back” (PDF), the actual number of consumers blocking ads is 26%. Many people think they are using adblock software when they are simply blocking popups.

This recent IAB report says that most adblock users are men 18-34 years old and that these same men make up the 15% of smart phone users that block ads.

Of consumers not blocking ads, 20% are past adblockers that were motivated by publishers who are blocking their content from them. The study also found that 17% of users not blocking ads may do so in the future.

So, why do people block ads? The study concluded the obvious, that consumers using ad blockers, want uninterrupted, quick browsing and a streamlined user experience. There is a perception that sites are easier to navigate without ads. This is also true for mobile phone users with adblockers.

The most annoying ads; Ads that block content, long video ads before short videos, ads that follow down the page as the user scrolls and auto-start ads. The main difference between people who use adblockers and those that don’t is that they are simply less tolerant of ads.

Adblocking Costs $12.1 Billion Now and by 2020 it will be $27 Billion

According to The Drum News adblocking will cost US publishers $12.1 billion in lost display ad revenues. Optimal.com predicts that this will is 23.8% of total earnings.

A new study from Juniper Research estimates that online publishers will lose over $27 billion by 2020, which will account for almost 10% of the total digital advertising market.

Is Adblocking Stealing?

Rufus Olins hosted a session on adblocking at the 2016 Shift Conference in London. The session looked at where adblocking would be in 5 years and how it would impact online publishing and advertising and whether or not adblocking would put us all out of a job, as Piers North put it.

North equates adblocking to literally stealing, the same as someone breaking into his house and taking property. “As we speak there are tens of thousands of people coming into our properties and consuming our content and there is no value exchange, absolutely none,” said North. “Should I be worried about that? Can I do anything about it? Is it worth me doing anything about it?”

“Adblocking continues to grow and if we do nothing about it, it will continue eating into our audiences and therefore taking away revenues from publishers and also take away audience from agencies and brands,” North said.

Adblockers Are Profiteers Holding Us For Ransom

“Adblocking has reached a tipping point,” said Hickey. “We know this because, bizarrely enough, adblocking was featured in an episode of South Park recently, which is very odd. Adblocking is literally being written about in hundreds and thousands of articles, but the thing that i think is not being spoken about enough is the truth behind this trend. The truth is that adblocking is really a bunch of profiteers that are holding our industry for ransom.”

“What’s actually going on is they are going into our publishers and demanding a significant proportion of their revenues in order to be included in a white list,” she said. “It simply is not acceptable. The reality is that if you play that scenario out of the next 4-5 years, it causes the death of journalism, because journalism is funded by advertising.”

“Most important, the publishers are starting to take action already,” says Hickey. “They are starting to deal with adblocking in a way that suites their audience. What I believe will happen next and is absolutely critical, is that the publishing industry will come together and act collectively to tackle the racketeers. Probably it will get legal quite soon which means it will get messy before it gets better.”

“Many of their business models are undoubtedly illegal,” says Rothenberg. “Already, Shine’s model of ISP-level ad-blocking has been cited by regulators as a probable violation of net neutrality principles.”

Is adblocking really about censorship? “This is why I hate the ad-block profiteers,” Randall Rothenberg told the audience at the opening keynote of the 2016 IAB Annual Leadership Meeting. Rothenberg is President & CEO at Interactive Advertising Bureau. “Now, you may be aware of a kerfuffle that began about 10 days ago, when an unethical, immoral, mendacious coven of techie wannabes at a for-profit German company called AdBlock-Plus took to the digisphere to complain over and over that IAB had “disinvited” them to this convention. That, of course, is as much a lie as the others they routinely try to tell the world.”

Rothenberg continued. “We had never invited them in the first place. They registered for this event online. When we found out, we cancelled the registration and reversed their credit card billing. Why? For the simple reason that they are stealing from publishers, subverting freedom of the press, operating a business model predicated on censorship of content, and ultimately forcing consumers to pay more money for less – and less diverse – information.”

“AdBlock-Plus is: an old-fashioned extortion racket, gussied up in the flowery but false language of contemporary consumerism,” says Rothenberg. ”

“I’m far from the first person to notice this,” he said. “Writing up an interview with AdBlock-Plus’s leaders more than two years ago in Salon, Andrew Leonard said: “It still sounds to me like something that bears more than a passing resemblance to a protection racket. Pay up, or we’ll break your windows! Pay up, or millions of Adblock Plus users will never see any of your ads.”

“Surveys repeatedly show that upwards of 75% of consumers prefer ad-supported Internet sites where the content is free over ad-free sites where they would pay fees for content,” Rothenberg said. “Fewer than 10% of consumers want to pay for content. By driving digital publishers, including some of the most prestigious news organizations in the world, to impose fees on consumers in order to continue to support their business and content-development objectives, the ad-block profiteers are subverting the will of consumers.”

The Bad News is AdBlock-Plus is Not Alone

IAB President Randall Rothenberg noted that for-profit adblockers have become the “darlings of the venture capital industry and angel investors” and include otherwise mainstream advertising technology and publishing companies.

There’s Shine, an Israeli startup that sells adblocking software for mobile phone networks so that they can block ads at the network level. Shine is backed by Horizons Ventures which backed Spotify and Facebook.

Then there’s Brave, that was launched by former Mozilla CEO Brendan Eich. Rothenberg says that “his business model not only strips advertisements from publishers’ pages – it replaces them with his own for-profit ads.”

“The ad-block profiteers are building for-profit companies whose business models are premised on impeding the movement of commercial, political, and public-service communication between and among producers and consumers,” says Rothenberg. “They offer to lift their toll gates for those wealthy enough to pay them off, or who submit to their demands that they constrict their freedom of speech to fit the shackles of their revenue schemes.”

Can Consumers Be Persuaded to Stop Using Adblockers?

Can adblocking kill the free internet? “It’s inconceivable, I think, that we would simply just allow this threat from adblocking to continue without actually having a strategy,” says IAB UK’s Steve Chester. “It’s something which we will have to develop. I don’t underestimate that it’s potentially an existential threat.”

The IAB study looked at how many people would turn off adblocking if requested to by a site as a condition to view content. Of those that are using adblocking software, 64% have seen notices on a website requesting that they turn off their adblocker. Over half (54%) said that they would sometimes temporarily switch off the software if it was the only way to access the content. For 18-24 year olds, 73% are willing to turn off adblocking.

The IAB study showed that 20% of people who have tried an adblocker no longer use one. The main reason is because of changing to a new device but the second most popular reason, not being able to access content, gives hope to publishers and advertisers that they can eventually change the mindset of people.

“The IAB believes that an ad funded internet is essential for providing revenue to publishers so they can continue to make their content, services and applications widely available at little, or no cost,” stated IAB UK’s CEO, Guy Phillipson. “We believe ad blocking undermines this approach and could mean consumers have to pay for content they currently get for free.”

“Part of the solution to tackle adblocking lies in making consumers more aware of the consequences, which seems like it’s starting to filter through,” Phillipson added. “If they realize it means they can’t access content or that to do so requires paying for it, then they might stop using ad blockers. It requires reinforcing this “trade-off” message – ads help to fund the content they enjoy for free.”

“More and more publishers are initiating what IAB calls “detection-notice-choice-and constraint” regimes,” says Rothenberg. “They are installing scripts that enable them to see when consumers coming to their sites have ad-blockers installed; they are providing notice to consumers about that and about publishers’ business models, which largely require advertising to support otherwise free content.”

“They are offering consumers choices – to turn off their ad-blockers, to pay a subscription fee, or another alternative,” he added. “And absent one of those choices, the publishers are constraining consumers’ access to content, reinforcing the immense value of what they deliver.”

Less Ads Would Be Blocked if Ads Weren’t So Annoying

The IAB study found that 45% of people would be less likely to use an adblocker if ads didn’t interfere with a page. In other words, people are tired of bloated Flash ads or sites that block content with popups or interstitials and the use of adblockers are simply a logical response to them. If there were less ads, 29% would be motivated to not use an adblocker and 12% would consider this if the ads were more relevant.

Adblocking has had some positive impacts on publishing by motivating publishers to stop serving annoying ads like pop-ups and interstitials. “We are organically moving towards formats that are more acceptable,” Piers North, the Strategic Director of Trinity Mirror Solutions told the Shift audience. “Yet having said that, if you look at the mobile experience, in-specials and pop-ups have had a resurgence. Adblocking is accelerating the need for us to get our house in order to make sure that the ad experience is as good as possible.” He noted that pop-ups and interstitials are a short-term play and that if you continue to do that you are going to kill your audience.

A Better Ad Experience

“If you provide website visitors with choice, and that’s what we advocate at the IAB and that’s where we see the industry going,” North said. “We’ve created the idea of lean standards or lean ads which are much leaner. We are looking to create a charter around that, so we are asking businesses, no matter where you sit, the buy side, sell side, intermediary to sign onto this charter as best practices.”

“LEAN stands for advertising and ad operations that are light, encrypted, AdChoices-supporting, and non-invasive,” says Rothenberg. “We believe LEAN will be as important to the future of the digital advertising industry as the first IAB Universal Ad Package was to its creation.”

Rothenberg says the the IAB intends to make LEAN the foundation of their activities for the foreseeable future. “And among our very first goals is introducing a public LEAN scoring system by which all publishers, all advertisers, and all agencies will be able to measure their activities against rational, reasonable, and consumer-friendly performance benchmarks,” he said.

“LEAN is the basis for a sustainable advertising ecosystem. We firmly believe that a combination of LEAN advertising and media, and publisher implementation of detection-notice-choice-and-constraint, will limit the impact of ad-blocking.”

“We want to actually give people a choice at the point of access,” says North. “You can come into this property and have a range of choices. It might be pay for this content, accept the ad experience, but it will be a better ad experience, or it might be some other form of payment like micro-payments or even a survey in exchange for access to content.”

“I think in 5 years ad blocking will continue to exist, but it will be on the fringes because we will have gotten our house in order, delivering a great ad experience and giving people choice,” he said. “I also think that we will move more toward native advertising in order to avoid adblockers. Remember, adblocking doesn’t kill all forms of advertising.”

“As agencies we are already taking significant steps to add value back into that consumer journey,” Hickey said. “Let’s face it, things like programmatic, launched a few years ago, some of it was done really badly, so we understand that younger people have had really bad advertising journeys and were incredibly annoying. Really good agencies are getting really good at adding value back into that whole journey and also getting much better at the nuts and bolts behind it.”

“The major driving force behind adoption of blockers is because users feel that advertisements are intrusive and detrimental to the user experience,” says Sam Barker, an analyst for Juniper Research and author of the May 2016 study ‘Digital Advertisers Vs the Ad Blockers’. “To make the browsing experience user friendly, advertisers need to find ways to serve ads that do not obstruct the objective of the user. Ad formats such as interstitials and pop-up ads are seen as very intrusive but, on the other hand, native advertisements work very well.”

Adblocking is a Brutal Countermeasure

“I’m not to make any predictions about adblocking, and nor should you, at least not with confidence,” says Ian Lesley, author and brand strategist at the Shift adblocking session. “Ten years ago everyone knew that TV advertising was dead and DVR’s meant that ad skipping was about to become the norm.”

“Skip to 2016, last years spend on interactive TV broke the $5 billion barrier for the first time,” said Lesley. “The question is why didn’t we see this coming or rather why didn’t we see it not coming? Simple, we fixated on the technology and we forgot about the human.”

“TV or print ads don’t take much time,” he said. “They don’t require anyone to think or make a choice or do anything. The cost of ignoring them is zero and when they are good, they are really good. Forgetting about the human is a perennial problem. Five years ago everybody knew that digital data meant that we could send people relevant information instead of this terrible flimflam called brand image. Clever us. Lucky consumers.”

“What’s the reality? Humans care about all sorts of things, but most of them most of the time do not care about brands,” stated Lesley. “I know it’s a bitter pill to swallow, but it’s why the dream of interactivity, engagement and brand conversations has all but died and it’s why people will reach for the ad blockers if the ads continue to be so insanely annoying.”

“Here’s another thing about humans, they make terrible predictions,” commented Lesley. “I’ve almost given up on prediction but not quite. I will predict that unless online advertising changes its form radically in the next five years humans are going to send it the way of interactive TV.”

“The point is that adblocking is an equal and opposite reaction to the brutally bad nature of online advertising,” says Lesley. “This is not a platform that has found its form. There was a moment when TV advertising discovered that you could do stuff with a 30 second ad that was really great and entertaining. People found ways to make that a very rich experience. That hasn’t happened yet with online advertising.”

“The experience of online ads is not pleasant and it actually gets in the way of them enjoying what they want to enjoy,” Lesley said. “So there is a distinct possibility that they will reach for a brutal countermeasure. Unless we get better at doing online advertising, creating things that people enjoy or at least can passively disregard and passively absorb when they want to then I’m afraid the adblockers will march on.”

Adblocking Goes Mobile

Some quick facts from the PageFair 2016 Mobile Adblocking Report:

• At least 419 million people (22% of the world’s 1.9bn smartphone users) are blocking ads on the mobile web.
• Both mobile web and in-app ads can now be blocked.
• As of March 2016 an estimated 408 million people are actively using mobile adblocking browsers (i.e., a mobile browser that blocks ads by default).
• As of March 2016 there are 159 million users of mobile adblocking browsers in China, 122 million in India, and 38 million in Indonesia.
• As of March 2016 in Europe and North America there were 14 million monthly active users of mobile adblocking browsers.
• A further 4.9 million content blocking and in-app adblocking apps were downloaded from the app stores in Europe and North America since September 2014.

“Although consumer adoption of mobile level ad blockers is lower than the desktop market, Juniper Research believes that adoption is set to witness a sizable increase,” said Juniper Research analyst Sam Barker. “Drivers of this include Apples inclusion of ad blocking compatibility with Safari and increasing consumer awareness.”

He adds, that much like desktop browsers, mobile ad blockers are not able to block all types of advertising:

• Internet Search and Display Adverts will be blocked, however like the desktop space, native adverts are not able to be blocked.
• Video Display Adverts are able to be blocked, except if the video is channelled through a mobile application.
• The possibility of blocking in-app advertising has been explored, however when speaking to players in the market many feel the practice to be morally unethical or the technical challenges too costly.

“In comparison to the desktop space, the mobile ad blocking market is still fairly nascent,” said Barker. “Since the announcement from Apple in September 2015 that iOS’s native browser would be able to support ad blocking applications there has been a rise in the number of users adopting the technology.

Sites are Fighting Back Against Adblockers

Forbes has taken an aggressive approach to adblocking, revealing that of those blocked, 44% of them turned off their ad blockers in order to access their content. Forbes is continuing to test other strategies including a version of the IAB Lean Ads concept.

According to Digiday, Slate has been using messaging to try and persuade users to turn off ad blockers and to sign up for their premium low ad content plans.

Wired says that 20% of their traffic comes from people using adblockers and in response to that they have restricted access to those using them. They offer 2 options to site visitors with adblockers:

1. You can simply add WIRED.com to your ad blocker’s whitelist, so you view ads. When you do, we will keep the ads as “polite” as we can, and you will only see standard display advertising.
2. You can subscribe to a brand-new Ad-Free version of WIRED.com. For $1 a week, you will get complete access to our content, with no display advertising or ad tracking.

Bloomberg has taken a different approach, cleaning up their site and adding more white space. “Everyone’s screaming and yelling, so let’s not scream and yell — let’s do the opposite,” Chris Briseno, digital creative director at Bloomberg LP, told Digiday.