Will ad blocking destroy digital advertising?

Technology that’s been around for years, which allows individuals to use services like apps and browser extensions to avoid seeing online advertising, has been causing new controversy in the past few weeks. According to Randall Rotherberg, president and CEO of the Interactive Advertising Bureau in the United States, the practice is “robbery, plain and simple.” Ad blocking is “a potentially existential threat to the industry,” he argued in a Sept. 22 opinion piece in Ad Age. “I wish I were crying wolf, but I'm not. Some websites, particularly those with millennial audiences, are already losing up to 40 per cent of their ad revenue because of ad blocking. Our own IAB research found at least 34 per cent of U.S. adults use ad blockers,” he wrote. Bryan Yeager, a New York-based analyst with research company eMarketer Inc., said in a phone interview that an ongoing debate has heated up because of new reports on how widespread the practice is, and because of a move by Apple Inc. to allow ad blocking in the latest version of its iOS operating system. It a “growing concern,” he said, though more of a problem for some parts of the digital advertising industry than others. A report in August from Adobe Systems Inc. and PageFair Ltd., which helps companies counter the effects of ad blockers, said the practice would cost publishers almost $22 billion US this year. Globally, ad blocking grew 41 per cent in the past year, to 198 million users around the world, according to the report. Yeager said ad blockers tend to be more popular in countries where there is a lot of concern about issues like data privacy and security, such as Germany and France. The rate of ad blocking among Internet users is 24 per cent and 27 per cent in those countries, respectively, according to a report released this month by ComScore Inc. and Sourcepoint, a company that offers consulting and tech services to publishers dealing with ad blockers. In comparison, 16 per cent of Canadians online use such technology, 10 per cent in the United Kingdom and nine per cent of those in the United States do, according to this data. The rate of ad blocking is highest among those aged 18-to-24, and is also high in the 24-to-34 age bracket, the report noted. In Canada, about 30 per cent of 18 to 24-year-olds and around 20 per cent of 24 to 34-year-olds blocked ads, it said. Canadians are also more likely to block ads from sports and games websites than from social media sites or those focusing on topics such as health, lifestyles or business and finance. “Will it be enough to materially impact publishers? I think that depends on what type of publisher you are,” Yeager said. “If you rely on ads for revenue, if that’s your major source of revenue and you’re seeing more and more of your audience use ad blockers and those types of things, then obviously, that’s a concern for your business.” It also depends on the type of advertising, since “native” advertising like sponsored content is less vulnerable. Ad blockers aren’t yet affecting apps, he added, while websites accessed through a browser are subject to such blocking. “It really depends on where you’re getting your audience from and how apt that audience is to be using these types of tools,” he said. In response, some companies are putting up messages aimed at people they detect are using ad blockers and asking them to turn the services off or, in some cases, not allowing users to access content while the ad blocker is on, Yeager said. Ad Age reported earlier this month that the IAB is considering, among other options, taking legal action against blockers. “I know it’s under consideration. I think it’s a long shot … from even going that far in the first place, but I also think it’s a long shot as to how fruitful that endeavour would be if the industry would embark on it,” Yeager said. He noted that when the movie and music industries went after file sharers a decade ago, the move put a “black-eye” on the reputation of industry organizations “for essentially going after their customers.” In Germany, recent cases by broadcasters and news sites against one such service, Adblock Plus, haven’t been successful. By using ad blockers, Yeager added, people are sending a message that “we want more control over this. We don’t like how you’re collecting all this information when there’s not really a lot of transparency into how it’s being used or anything like that. So they’re kind of taking matters into their own hands in that respect.” Ed Cartwright, vice-president of corporate communications at the Canadian Marketing Association, said in a phone interview that much of this debate is around consumer choice. “Some of the technologies that are being used out there right now have raised the ire of consumers. being served with marketing messages or ads that are relevant. So they’re taking the drastic step of just saying ‘well, I don’t want get any ads at all,' ” he said. Targeted ads are based on the tracking of customers’ online behaviour. While Cartwright acknowledged some customers turn to ad blocking technology because they want to avoid targeted ads, he said he thinks many consumers are also turning to ad blockers because of “the annoyance factor.” “The privacy factor is obviously going to play into this, but it’s as much consumers who are just annoyed,” he said. “This speaks back to pop-up ads that we used to see on websites and that just annoyed people to no end, and we've seen those disappear, for the most part. Now it’s the serving of ads that are just not relevant to the person’s interest, or consumers asking … 'Why are these ads being served to me?' and organizations just not being transparent.” In Canada, the Office of the Privacy Commissioner recently criticized targeted ads on sensitive topics, and earlier in the year told BCE Inc. it must use an opt-in model for its targeted advertising program. People should be able to choose what ads they see, and companies must be transparent with customers about the process that produces targeted ads, Cartwright said. “Consumers have to understand that the Internet is not free. There has to be revenue for those organizations to be able to provide the services they do on the Internet,” he added. Ben Williams, spokesman for the German company Eyeo GmbH, which makes Adblock Plus, said the company doesn’t see ad blocking as something that will destroy the ad industry. “This is something that users do because they’re demanding better from a broken advertising ecosystem,” he said. “The majority of the ads out there just don’t deliver much value.” They may also lead to malware, steal the users’ data, track the user or clog the screen, he added. “The reason ad blocking evolved was because of bad ads,” he said. “We see that as a symptom of an industry that’s really just run amok and forgotten the user.” Advertisers should serve users and react to their unhappiness with the current system, he said. He noted that Eyeo has an "acceptable ads" program, which allows ads that fit a certain criteria through the blocking system. The company charges some companies to participate in the system, which IAB’s Rotherberg said in his article amounts to “shaking down publishers.” Williams said the company charges companies because the program creates value for them, and to pay for the work Eyeo needs to do to include the ads. Williams said this was started when the company started exploring options to allow users to see some ads due to fears that “increased use of ad blocking may kill the free content that we all love online.” Very few users opt out of the acceptable ads program, he noted. Eyeo has been reaching out to publishers and others in the industry “to get together with us and talk about how we can improve ad blocking and how we can sort of work together,” he added. “We wanted to bring all sides together and work towards some sort of sustainable solution, because it just doesn’t work if we’re constantly butting heads.” — With reporting by Anja Karadeglija at akarad@thewirereport.ca and editing by Derek Abma at dabma@thewirereport.ca

Will ad blocking destroy digital advertising?

Broadcast | September 25, 2015

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