For many digital publishers, advertising is their primary source of revenue. Ad blocking software seemingly represents a clear and present danger to this income, but could it really spell the end for online websites and magazines?
The use of adblocking software increased by 48% in 2015, and now accounts for an estimated $21.8bn in lost revenue from unseen ads globally. According to adblock solutions provider PageFair, Google, which made nearly $60bn from advertising in 2014, lost an estimated $6.6bn in revenue due to adblocking during the same period.
Industry leaders have been more-or-less united in their disdain for adblocking. New York Times Co. Chief Executive, Mark Thompson, said in an earnings call to discuss the company’s third-quarter results that, ‘We oppose ad blocking. The creation of quality news content is expensive and digital advertising is an important way in which we and other high-quality news providers fund operations.’ Mike Germano, Chief Digital Officer at Vice, was blunter in his condemnation, telling a New York industry conference earlier this year: ‘I love my audience, but f**k you, ad blockers – 20% of my revenue is gone.’
And the tide does not appear to be turning in their favor. In September, Apple rolled out the latest version of its iOS operating system, iOS 9, which introduced adblocking for mobile through its default Safari browser to millions of users for the first time. This has been treated by many as devastating news, with 20% of all web browsing taking place on mobile Safari, and it has caused panic in digital publishing circles. One Wall Street analyst recently wrote that, ‘In a worst case scenario, this is Apple against the entire mobile publisher and advertiser ecosystem.’
Has the problem been overstated though? Android users have had access to ad blockers for some time now, and advertisers have not been unduly affected to-date. It is doubtful that iPhone users will exploit the functionality any more than their Android-using counterparts. And it is also not as if digital publishers are completely helpless. As Brian Pitz, an analyst at Jefferies, notes: ‘If browsers start negatively impacting publishers' abilities to monetize their mobile content, it may trigger a backlash where certain sites are ‘not optimized for use with Safari.’ A company like Apple, that prides itself on its usability, may find that this is a worse option than running ads.
Adblocking software has been around for a long time, but industry professionals had not really considered it a threat, and had not taken it into account when developing their business models. There may currently be no need to panic, there is, however, a need to prepare. Many companies are finding ways to mitigate against their reliance on ad revenue by using subscription models. However, only the FT has an undeniably successful subscription-based model at the present time, with 500,000 paying digital subscribers. Established papers can use a subscription model, but it is not really an option for most firms. There will need to be a rethink of how advertising operates on the web that takes into consideration user’s concerns about online advertising, gauges what they want, and caters for this.