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Ad Blocking: The Impact and Why We’re Seeing More of It

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Ad Blocking: The Impact and Why We’re Seeing More of It

According to a recent eMarketer report, ad blocking is expected to grow by double digits in both 2016 and 2017. The use of ad blocking software has gone up 34.4% from 2015 to 2016. In fact, around 69.8 million Americans will use an ad blocker this year. Next year, that figure is predicted to jump 24% to 86.6 million people. In addition, around one in five people will use an ad blocker this year.

Still, it can be harmful to online revenue. eMarketer senior analyst Paul Verna said, Ad blocking is a detriment to the entire advertising ecosystem, affecting mostly publishers, but also marketers, agencies and others whose businesses depend on ad revenue. The best way for the industry to tackle this problem is to deliver compelling ad experiences that consumers won’t want to block.”

Where ad blockers can be found

eMarketer also reports that ad blocking is more common on PCs over smartphones. Around 63.2 million will use an ad blocker on their PC compared to 20.7 million who use one on their smartphone. This means that around 29.7% will block ads on their mobile devices.

Verna also states, “Ad blocking is more common on desktops and laptops because screen sizes are large enough to accommodate multiple ads. This includes videos that might be out of view but still audible, which are especially annoying to users.

Also, ad blockers typically don’t work on apps, where users spend most of their mobile internet time.” Yet, the number of individuals using mobile ad blockers will rise to 62.3% this year.

Causing division

Ad blocking software is dividing the online world. On the one hand, supporters want to get through the content without having to view ads. On the other hand, companies that depend on advertising say it violates the agreement that people get to see free content paid for by digital advertising.

Not to mention, behemoths like Google and Facebook rely heavily on advertising. A PageFair report also shows that around 159 million people in China have installed ad-blocking software on their cellphones. The software is costing the global advertising industry billions of dollars a year in lost revenue.

Despite Google making a huge chunk of revenue from advertising, Chrome users are blocking ads by 86 million users compared to 41 million on Firefox. Estimates suggest that Google lost $1.86 billion in U.S. revenue to ad blocking in 2014.

What many users don't realize

Sure, it is fun to block ads. Yet, this can directly impact the future of the web. Oftentimes, ad revenue is the main source of income for many websites and apps. There is a sizeable and fixed cost related to creating content. This can be alleviated by placing ads next to content. Each time an ad is shown to a visitor, advertisers pay a fraction of a cent.

Yet, ad blockers cut off this form of revenue. As a result, it is difficult to offset the cost of storing and delivering content to visitors. U.S. publishers are already losing more than 9% of ad revenue because of ad blocking. Many websites may even face financial collapse.

The effect on publishers

Web users want and enjoy the variety offered on the web. Nonetheless, ad blockers can force websites out of business. As a result, few content choices will remain. The ones most likely to close shop are those not subsidized by print or television.

Then, there goes the content democratization led by the web. Plus, it will increase user costs in the long run. Why? Websites will be forced to charge for content that used to be free due to support from ad revenue. Then, regulation may come about putting the web in the hands of legislators.

The threat is existential

After years of disruption and pain, the media industry has finally found a way to settle on a revenue model. This includes circulation and ad revenue. Since fewer people are willing to pay for news, advertising was supposed to make up for it. Now, another reckoning has come to fruition.

Media analyst Frederic Filloux wrote, “For publishers, ad blockers are the elephant in the room. Everybody sees them, no one talks about it.” Unfortunately, many Internet users have already made the decision that they hate online ads. So, publishers are hoping that the growth of mobile will stave this off for a bit longer where many blocking plugins don't work or take too long to install.

Although, that's basically kicking the can. Apple's new operating system allows for ad blocking on Safari. Wired had this headline: “Apple’s support of ad blocking may upend how the Web works.”

The players

There are several ad blockers on the market, but the biggest is Adblock Plus--made by German company Eyeo. It boasts 60 million active users. Adblock Plus has been sued in German courts by publishers who argued that users shouldn't have the ability to block ads, and the publishers lost.

Adblock Plus does allow some ads through its firewall. Websites must also apply to get "whitelisted" to allow an Adblock Plus employee to make sure selected ads comply with their criteria. Around 700 publishers and bloggers have already been whitelisted.

Eyeo then charges for-profit publishers a percent of ad revenues to be on the list. Some have called this extortion, yet it has been reported that Google, Microsoft and Amazon are paying Eyeo for their acceptable ads to appear to Adblock Plus users.

Is there a solution?

Of course, there are companies trying to compete with the rise of ad blockers. PageFair is one company that is helping companies measure how many users are blocking ads and how much revenue they're losing. In addition, PageFair has technology that lets publishers display acceptable ads that can circumvent ad blockers.

There is also Sourcepoint that lets publishers show ad blockers this message: “One of the consequences of using ad blocking software is that it significantly damages the value exchange between consumers and creators of digital content.” The users can then click a link to disable ad blocking on that site. Moreover, publishers can tell ad blockers that in order to continue on that site, they must restore banner ads or pay a fee.

The media ecosystem is facing yet another existential threat. How everything pans out remains to be seen. What needs to happen is education. Users need to understand the negative impacts of ad blockers, otherwise the World Wide Web may become a vast space of nothingness.

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