Ad blocking: who are the winners and losers?
What does ad blocking mean for publishers, advertisers and consumers in Asia? Lee Walsh highlights the winners and the losers.
Here’s the deal: pay $3.64 a month and the internet would be completely free of ads. No banners, no sponsored search, zero tracking and no pre-rolls.
eMarketer estimate that $70 billion was spent on digital advertising in APAC last year. When this is spread across 1.6 billion internet users it is just $3.64 per month.
With the rise of ad blocking why not apply a subscription to the whole internet and leave the ads to TV and print?
Companies like Spotify and Netflix have built multi-billion dollar businesses based on giving users access to content on demand without the annoyance of advertising. Even Google recognises that YouTube would be a much nicer place without advertising through its ad free subscription service, YouTube Red.
The actual scale of ad blocking is still unclear, with estimates varying greatly between studies and markets. A recent report by Global Web Index estimate that 27 per cent of APAC internet users use some kind of ad blocking software. Nearly all the research does agree that certain demographics are much more likely to block ads. Namely Millennials. The one target audience that many brands are obsessed with reaching.
My wife worked in magazine ad sales for many years. When we first met I questioned her career choice of battling away in an industry with declining audience and revenue figures. She replied: ‘People buy magazines for the ads, no one goes online for banners.’
And therein in lies the problem.
Spend any time in Singapore and you will see that people really do like to buy things. They even like a lot of brands. Many of the most viewed videos on YouTube are commercials. Yet, when listening to the proponents of ad blocking you would think that advertising repulsed the average citizen.
The problem is clearly not in advertising but the format it is delivered in.
Ad blocking software has been around for years on desktop. In two minutes you can download a plugin for Chrome and your desktop surfing will be largely ad free. Some people did this, but not a lot.
When it comes to mobile it is a different story.
On mobile where data costs money and waiting a few seconds for a page to load seems like an eternity, poorly designed and data heavy advertising is not tolerated.
Who are the winners in ad blocking?
Telecommunication companies: In many developing markets mobile networks are creaking under the explosive growth of data hungry users. Consider that on many mobile sites advertising and tracking can account for 40 per cent+ of data. Blocking ads frees up valuable bandwidth.
Content, native advertising, sponsorships: In general most content that is not ad served is not blocked. Although, there is only so much content that people can consume. The bigger challenge is advertisers ability to produce content that resonates and at scale. For every one Redbull there are 10 banks trying to get down with the kids.
Who are the losers?
Publishers: The main losers in ad blocking are publishers. Already many publishers are struggling to transition from offline to digital business models.
A study by Adobe estimates that worldwide ad blocking cost publishers $21.8 billion in 2015. This is forecast to almost double to $41.4 billion in 2016.
The ad tech industry: Ad servers, DSP’s, DMP’s, SSP’s, exchanges… For all its complexity the digital advertising ecosystem is still largely built on delivering standard ad formats and video. This has been surprisingly easy for ad blocking apps with a handful of engineers to cancel out. A host of start-ups have emerged to help publishers circumnavigate ad blockers, but the success of this tech-based arms race remains to be seen.
Advertisers: If ad blocking really does become mainstream advertisers will find a way to spend money elsewhere. It is publishers that will bear the brunt of the issue in the short term. However, advertisers won’t get off that lightly.
More spend will be channelled to fewer placements not affected by ad blocking. The natural end game is that this will increase advertiser competition and drive up rates on these placements.
What about consumers?
Whilst consumers may enjoy quicker mobile surfing and lower data charges, most people want internet content to be free.
Advertisers and publishers have a short window of time to recognise how people use mobile devices and deliver formats which are both engaging and acceptable to consumers.
Lee Walsh is the regional managing director, Southeast Asia and India, for Publicitas