There is a tragedy of the commons brewing in the online ecosystem. While online consumers dislike online ads enough to deploy ad blockers at an exponential rate, the vast majority of publishers rely on ads to bring content to these same users for free. If ad blocking software adoption continues to grow, what will the true cost be for each party?
We all get it - ads can detract from the user's experience. Tivo and DVRs gave television viewers a way to circumvent advertising through "ad zapping." As consumer behaviors shift to online, ad blockers have now given internet users a similar option. They simply stop requests to specified ad servers or restrict certain page elements from loading onto sites. Unless an ad meets certain criteria or the publisher pays for their site to be "whitelisted," the ad is blocked from the end-user. This includes pre-roll, mid-rolls, interstitials and any ads that are deemed non-static.
Believing this whitelist practice to be anti-competitive, a group of French and German publishers recently sued a leading developer of ad blocking software, only to have the court rule in favor of the ad blocking developers. (While the reason for the ruling has not yet been disclosed, the plaintiffs and other leading publishers plan on pursuing further legal action).
This isn't just an issue impacting European publishers—it's becoming a global publishing concern. Video ad spend increased 60% in 2014, while ad blocking increased over 100% in the same time period, according to a study by PageFair and Adobe. Currently there are over 150 million people blocking ads. If exponential growth rates continue, the global figure is expected to double again in 2015.
Digitally savvy millennials are driving the growth of ad blocking technology, with nearly half of those surveyed learning about the option from a peer. Users generally cite a dislike for intrusive ads, as well as concerns about privacy and performance as the main factors for installing ad blocking software.
The fact remains: publishers’ entire business model relies on ad dollars to support the creation of content that is free to users. While the use of ad blockers is currently legal, it isn't conducive to a healthy ecosystem for users, publishers or advertisers. As the ad blockers become more popular, the industry will be forced to adjust as publishers find new means of monetization.
There is a quiet arms race between publishers and ad blocking companies that has spawned a handful of tactics aimed at tilting the scales back in favor of the publishers. The question they're all trying to answer is—what is the best way for publishers to respond to ad blockers?
Here are a few suggestions:
2. Appeal and Educate. Gaming site Destructoid found that up to 50% of their traffic was blocking ads. They reacted with a plea to their community, asking them to unblock Destructoid to continue to support free game play. Other publishers have asked their users to whitelist their sites in the blocking software. Users will only listen to these pleas as they begin feeling the pain associated with having to actually pay for content or gameplay.
3. Adaptive Advertising. Ireland-based PageFair provides another solution. They measure the cost of ad blocking for publishers and help offset this cost by displaying alternative advertising to users running ad blocking software.
4. Payoff the Ad Blockers. Sites like Google, Microsoft and Amazon are already paying Ad Block Plus huge fees to whitelist their ads. Mike Zaneis, EVP of the Interactive Advertising Bureau (IAB) refers to this as a "ransom note," and believes that ad blocking is fundamentally wrong and creates an unsustainable economic situation.
5. Permission and Incentive Advertising. Verizon recently launched their Selects reward program, which allows users to earn points and rewards for voluntarily allowing third parties to deliver targeted ads based on user data. Through incentives, ads that were once considered annoying may be more relevant and tolerated. There’s a long way to go before broad adoption of these more proactive win-win solutions, but creative thinking may unlock new advertising revenue.
As you can see, there are carrot and stick approaches to managing the rise of ad blocking. Regardless, publishers will be forced to try new monetization methods if ad blocking continues to grow at this pace. The digital advertising ecosystem will have to rethink the way content and customers interact or the result could be a pay-per-view internet.
Topics: Altitude Digital