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2015-06-05 07:04:53
Internet users are increasingly blocking ads, including on their mobiles
Jun 6th 2015 | From the print edition
Timekeeper
IN ADVERTISING, an old adage holds, half the money spent is wasted; the problem
is that no one knows which half. This should be less of a problem in online
advertising, since readers tastes and habits can be tracked, and ads tailored
accordingly. But consumers are increasingly using software that blocks
advertising on the websites they visit. If current trends continue, the saying
in the industry may well become that half the ads aimed at consumers never
reach their screens. This puts at risk online publishing s dominant business
model, in which consumers get content and services free in return for granting
advertisers access to their eyeballs.
By some estimates, more than 200m people worldwide are now regular users of
ad-blocking programs (see chart). Eyeo, the maker of Adblock Plus, the most
widely used such software, says it has been downloaded more than 400m times.
Until fairly recently, ads were mostly being blocked on desktop and laptop
computers but now people are installing the software on their mobile devices,
which are expected to account for a growing share of their time online.
Ad-blocking software used to be fiddly to install, and thus its use was
restricted to a technically adept minority. But now it typically comes in the
form of an add-on to a popular web browser such as Chrome or Firefox, which can
be installed in a few clicks. Websites use of ever more in-your-face
advertising formats (videos that play automatically, pop-ups that obscure the
text you are trying to read) have driven ever more people to seek ways to block
them. Younger consumers seem especially intolerant of intrusive ads, and as
they get older, overall ad-blocking rates are bound to rise further, predicts
Peter Stabler of Wells Fargo Securities, one of the authors of a recent report
on the phenomenon.
Not many publishers put a figure on their losses from ad-blocking, but
ProSiebenSat.1, a German media group, has said that in 2014 the practice cost
it 9.2m ($10.4m) about a fifth of its web revenues. Publishers with a male,
technophile audience are worst hit, says Sean Blanchfield of PageFair, an Irish
startup that helps publishers quantify and manage ad-blocking. At some online
video-game sites more than half of ads get blocked.
Small wonder that web publishers have started to take action. Some are
switching to subtler means of advertising, such as promotional articles written
in a similar style to the site s editorial content. Others are trying to
educate their audience. Ad-blocking visitors to the website of the Guardian, a
British daily, for example, are greeted with the message: We notice that you
ve got an ad-blocker switched on. Perhaps you d like to support the Guardian
another way?
A few are taking a more robust approach. Some sites, such as Hulu, an online
video service, block users who try to block its ads. In Germany several media
groups have sued Eyeo. Its software lets some ads through, as long as they are
not too intrusive, and in the case of the most popular websites, as long as
they pay for the privilege. Some internet firms, including Google, are said to
have cut a deal with Eyeo to have their ads included on the firm s whitelist
(Google declined to comment on this). The plaintiffs in the court cases argued
that this is extortion. Eyeo, for its part, argues that the scheme lets
publishers make at least some money, and that it does need some way of covering
the cost of maintaining the whitelist.
In two cases so far, German courts have sided with Eyeo, and ruled that its
product and its business model are legal because users are informed about the
whitelist before installing the software. But even if other cases go against
it, this is unlikely to stop ad-blocking. Most such software is based on a
shared list of ad-serving computers, maintained by volunteers. So if the online
publishers succeeded in making Eyeo go away, other providers would take its
place.
The online firms had grounds for hope that, as consumers spent more time on
smartphones and tablets, the ad-blocking problem would fade, since Apple and
Google, which provide the operating systems for most such devices, can control
which apps may be installed on them. In 2013 Google banned ad-blocking apps by
Eyeo and other providers, arguing that they interfered with the workings of
other apps.
However, these mobile walled gardens are not impenetrable. One way in is for
users to download an alternative web browser to the one that came installed
with their device, which incorporates ad-blocking features. One such, UC
Browser, already claims 500m users, particularly in China and India. Last month
Eyeo released its first ad-blocking browser, which so far is available only on
devices running Google s Android system.
Since such browsers only block ads on web pages that are viewed using the
browsers, it is hard to claim they are interfering with other apps. That means
they cannot block ads that appear within apps. However, even this sort of ad
may not be immune to being blocked for long. Shine, an Israeli firm, has
developed equipment that would allow mobile-network operators to block ads of
any kind those to be displayed inside apps as well as those for web browsers
before they reach subscribers phones. Shine says that it is in discussions
with a number of wireless carriers, and that some will start using its product
soon. One European operator has reportedly installed Shine s product in its
data centres and plans to turn it on before the end of the year.
Transatlantic tensions
If mobile ads were blocked by default, this would violate the principle of
network neutrality, which holds that internet providers should treat all types
of traffic equally. In 2013, when Free, a French internet provider, installed
ad-block software on its modems, the government forced it to make the service
optional. But even if it is left to smartphone users to turn on ad-blocking,
the results could be controversial. If lots of mobile subscribers did switch it
on, it would give European carriers what they have long sought: some way of
charging giant American online firms for the strain those firms put on their
mobile networks. Google and Facebook, say, might have to pay the likes of
Deutsche Telekom and Telef nica to get on to their whitelists.
If that happened, the online firms would surely fight back. If an operator
were, say, to block the ads on Google s search service, Google could retaliate
by trying to stop that operator s subscribers from accessing their Gmail
accounts. Such a tit-for-tat is not as far-fetched as it may seem: Google
closed its news-aggregation service in Spain after a new law required it to pay
for using excerpts of publishers content. If the mobile firms are not careful,
they could start the world s first digital trade war.