The use of ad blocking tehnology has spiked in the last year, and while users might feel relieved at not having to deal with intrusive ads as they flick through content, publishers are in pain.
First marketers, ad tech platforms and publishers alike were hit with the bombshell 2015 Ad Blocking Report by PageFair and Adobe that found ad blocking software had cost almost $22 billion in lost revenue by August of this year.
Just this week a new analysis of that research came out that suggested the multi-billion dollar figure was overstated due to supply and demand issues. Mainly that's because blocked ads that never got served were essentially taken out of the inventory, reducing supply and driving up prices and demand. If those ads were added back into the inventory supply would go up, prices would go down and the value of those blocked ads would be far below $22 billion.
Piling on ad blocking concerns was news that the latest iteration of Apple’s iOS – iOS 9 coming out Sept. 16 – is going to include ad blocking capabilities for the mobile Safari browser. This got the attention of marketers and publishers because mobile had been seen as something of a safe haven from ad blocking tech. Research from Genesis Media found 24% of respondents used ad blocking software on home and work computers, but only 3% had ad blocking tech installed on their mobile devices. The news about iOS has given the various players in the space new concerns about the technology and the mobile channel.
The impact of ad blocking tech
Ad blocking software affects three main players in digital advertising: marketers, ad tech firms and publishers, but it doesn’t impact each player equally.
In a way marketers are the least affected group. While their message isn’t reaching the desired audience when that audience blocks the ad message, those ads aren’t really "blocked," but really just go unserved. Thanks to that, they don’t actually cost marketers anything monetarily. An unserved ad won’t count as an impression, and it certainly can’t be engaged with via a clickthough, so there is nothing for advertisers to be charged for with a blocked ad.
One place where marketers can be affected with blocked ads is conversion rate. For example, if you have a paid-per-click campaign on search result pages based on specific keywords, anyone using those keywords and also employing ad blocking tech will never even get the chance to clickthrough to your website or landing page because they’ll never see your ad.
A group that feels the bite a bit more viscerally is ad exchanges and networks, such as Google’s Doubleclick Ad Exchange. The reason is obvious – ads are bought by marketers, but when ad blocking software prevents those ads from being served those ads essentially never existed. There’s no impression or engagement to charge marketers for, so each ad that gets blocked represents actual lost revenue for these groups in the middle of the digital ad process.
The group that really gets hit with ad blocking software, however, is website owners and publishers counting on that ad revenue to keep the site going.
The ad blocking pain of publishers
Ad blocking tech puts publishers, particularly big media companies, into a bit of bind. The typical web user has become very accustomed to free content on the internet, even from major media outlets such as the New York Times, the Atlantic and many more. The problem for these entities is that content is far from free to produce. It requires newsrooms, journalists in the form of writers or videographers, and editors – maybe even several layers of editors.
To offset these costs, especially as more and more readers move online and drop subscriptions to physical versions of the product, publishers began counting on ad revenue from their sought after website traffic. Ad blocking technology cuts that revenue stream off at the knees.
A Washington Post spokesperson told BuzzFeed, “Many people already receive our journalism for free online, with digital advertising paying only a portion of the cost. Without income via subscriptions or advertising, we are unable to deliver the journalism that people coming to our site expect from us. We are currently running a test using a few different approaches to see what moves these readers to either enable ads on The Washington Post, or subscribe.”
Some publishers have fought back by attempting to circumvent ad blocking software, but several German publishers, including Die Zeit, Handelsblatt, RTL and ProSiebenSat.1, all lost to AdBlock Plus in German court when attempting to find the company engaged in illegal and uncompetitive practices.
Apple’s move is also already affecting publishers, especially publishers highly dependent on Apple user traffic (which is increasingly coming from mobile devices), such as 9to5Mac.com, a website that reports on Apple news. Seth Weintraub of 9to5Mac told BloombergBusiness 60% of the site’s traffic comes from iPhones and iPads, and the new ad-blocking capabilities in iOS may force the site to find new sources of revenue. He added, “We're looking at steps to counter. There is a lot of indication that people are looking forward to using ad-blockers on mobile devices.”
The estimated $22 billion in lost revenue might be overstated, but even so, ad blocking technology remains an issue that is striking marketers, ad tech firms, and to greatest extent, publishers at the core. More parties counting on digital ad revenue on their websites are going to be forced to fight back, that is unless ad block users relent.