Publisher's 2016 Ad Blocking Tsunami.

The Rise of Ad Blockers

One of the biggest trends for digital media publishers for 2015 was the rise of Ad Blockers, and it seems that it will impact Publisher's business models even further in 2016.  Recent reports, show an alarming trend that Internet users are blocking adverts more than ever before.   

Apple’s App store alone has 100 Apps available that users can download, install and set-up within a few minutes and start blocking ads served on a Publisher's site.  This is quite frightening for publishers as most publishers have built business models based on generating revenue through advertisements.   Users generally dislike intrusive Ads as well as being tracked with tags that Publisher’s then use to serve more targeted Ads or sell the user's "content consumption data" to third party advertisers.  Website pages are often clogged with flashy, data-intensive banners, slowing loading times that intrude on the user’s experience.

Trevor Kaufman, CEO of Piano, a company that helps publishers to monetize their properties, using dynamic business rules, spoke to Business Insider, stating that only a few big players like BuzzFeed and news aggregators will be able to continue running a purely free-to-consume, ad-funded model.

"Publishers seem to have forgotten that increasing the number of loyal customers is what the business is all about.  [...] New York Times is making more money from subscriptions than advertising"

Trevor Kaufman, CEO, Piano.

Kaufman believes that most publishers got it completely wrong building their online business model.  Instead of pursuing higher and higher page views, he recommends more media businesses should be looking at their digital strategy like e-commerce companies do. The ones that do, will win out.

"Publishers seem to have forgotten that increasing the number of loyal customers is what the business is all about. Even the New York Times is trying to emulate BuzzFeed, despite at the moment New York Times making more money from subscriptions than advertising. But I think you're going to start seeing real differentiation on the web between premium product and free product," stated Mr Kaufman.

This thinking is starting to resonate with many premium publishers as average CPM prices for digital advertising have been showing a historical trend of falling since the beginning of the first display banner, back in 1993-1994. 

Publishers today are facing a double whammy, as users are commencing to use Ad Blocking software to block ad units as they consume content from Publishers.

Trevor Kaufman, CEO, Piano

A recently published a global report of ad blocking  from PageFair & Adobe found the following:

• Ad blocking estimated to cost publishers nearly $22 billion during 2015. 
• There are now 198 million active ad blocking users around the world. 
• Ad blocking grew by 41%globally in the last 12 months.
• US ad blocking grew by 48% to reach 45 million active users in 12 months up to June 2015.
• UK ad blocking grew by 82% to reach 12 million active users in 12 months up to June 2015.

Global ad blocking will continue to rise as they have been throughout 2013, 2014 and 2015. And the amount of people using ad blocking software grew by 41% year by year. While in the US, 16% of the online population blocked ads with a growth of 48%. Meanwhile in Europe, ad block usage had grown  by 35%.

The numbers are due to accelerate in 2016, as only iPhone 5S or newer can actually use ‘content blockers', as more iPhone users will be upgrading their devices.  Currently it's estimated that in the US, 50% of the iPhones are 5s or newer.

Apple has tapped into the market in the mobile industry by introducing recently, a mobile operating system, iOS 9, that allows ad-blocking software, propelling ad-blocking programs to the top of its app store's most downloaded list. 

More importantly, Apple’s support for ad blocking software will make those applications mainstream. On September 21, the top selling app in Apple’s App Store was Crystal, an ad blocking program.  Purify Blocker, a rival to Crystal, was No. 4.  Most recently, as of December 28, 2015, according to AppAnnie, a site that tracks downloads for all mobile operating systems, lists Adbl0ck Mobile, as the most downloaded Ad Blocking app, averaging over 80 download per day.  App tracking site, SensorTower, puts a market value on the app of US$611,469.  Not bad for an app that has only being available for last 9 months.

“Ad blocking has gone mainstream,” says Peter Fader, marketing professor at Wharton. “The move to ad blocking is symptomatic of the fact that we can’t take a business practice like advertising from another domain and assume it will work in an online setting, too.”

Kevin Werbach, a legal studies and business ethics professor also at Wharton, says Ad Blockers wouldn’t be as popular if publishers and advertisers didn’t go too far in trying to extract advertising dollars from visitors to their properties. “Most people don’t have a problem with online advertising, but when it becomes overwhelming and degrades the quality of the web and mobile experience, they will eventually rebel, [...] There’s a tragedy of the commons here, with so many trackers and ad networks piling on top of each other behind the scenes for the same page.”

The ugly truth of Ad Blocking technology, such as Eyeo GmbH, the company behind popular desktop ad-blocking tool Adblock Plus, accepts payment from publishers and advertisers, to be put on a whitelist, allowing those ads to pass through it's filter.  Eyeo stipulates that they must comply with its “acceptable ads” policy, insisting that the ads should not be disruptive or intrusive to users. To date, a total of some 700 companies meet the acceptable ads policy, and it is estimated that 90% of those companies have a financial relationship with Eyeo.

Publisher's Response

Axel Springer, Germany's Media Conglomerate and Europe's rising digital media group, has responded by launching legal challenges on the validity of the ad blockers.  It's first target was as Eyeo's AdBlock Plus, a Browser extension and mobile ad blocker.  However, the court ruled in favour of  Eyeo, stating that the web browser extension didn’t breach laws on competition, copyright or market dominance, according to a report from Reuters.  Axel Springer said it would appeal the ruling.

In September 2015, Axel Springer recently commenced another legal proceeding against another Ad Blocker App; Blockr.  Axel Springer's subsidiary WeltN24, specifically wants Blockr to halt further development and distribution of the App.   In a hearing on Nov. 19, lawyers for Blockr argued that their software is legal and optional, a view the court reportedly backed. The court suggested that Axel Springer use alternate ways of fighting ad blockers, such as halting access to a site when the software is detected.  

“Ad blocking has gone mainstream [...] The move to ad blocking is symptomatic of the fact that we can’t take a business practice like advertising from another domain and assume it will work in an online setting...”

 Peter Fader, Marketing Professor, Wharton.

In October, Axel Springer implemented ad blocking detection software on one of their main properties; Bild, Europe’s top-selling tabloid.  Access to the content is locked if a browser is using Ad Blocking software, asking readers to subscribe at €2.99 a month or switch off ad blocker in order to continue navigating the news site.

On October 23, Eyeo's AdBlock Plus comms and operations manager Ben Williams said that Axel Springer asked the company to remove a posts created by one of its independent moderators in one its open forum, in which users discuss how to get around the Bild.de wall by using a filter.  When the company refused to remove the post, Axel Springer served Eyeo with court papers ordering it to remove the posting.

In the US, a few publishers are starting to launch similar models.  Conde Nast’s GQ.com detects when a user access the GQ site they are reeted with a paywall. “Please Disable Your Ad Blocker” reads the notice. “Turn off your ad blocker or purchase instant access to this article, so we can continue to pay for photoshoots like this one,” pointing to an image Amy Schumer, an American stand-up comedian, writer, actress, and producer. 

As of December 2015, Axel Springer is one of many publishers that are taking a confrontational approach in dealing with ad blockers.  The FT recently reported. U.K. newspaper City AM locks out content from ad blockers in its website; U.K. broadcasters ITV and Channel 4 have now done the same.  In the US, Washington Post redirects readers to a subscription page, or asks them to sign up to newsletters, or disable their ad-blocking software.  Yahoo has gotten in on the action, blocking users from their free email service when they have AdBlock running.

Ad Blocking in Latin America

Ad Blocking software's arrival in Latin America couldn’t have come at a worse time as the whole region is suffering from an economic downturn driven by the end of a Global commodities cycle.  Opposing political parties, have used the contraction, as a way to blame current centre-left governments, fuelling internal pessimism within the population as well as foreign investments.  Additionally, the residing tide has exposed government and private corruption as well as mismanagement from both sides of the political spectrum.

“There are two immediate problems we need to understand: how far do ad blockers reach among the Brazilian inventory and how much income is lost” 

Pedro Silva, CEO, IVC.

As the worlds fastest growing digital advertising market, the region will still manage to rise from $1.29 billion to $7.92 billion between 2015 and 2019 in digital ad spend.  Spending is expected to have increased by 107.3% in 2015,  posting double-digit gains annually through the end of the 2019, as the region's mobile internet audience grows rapidly according to an eMarketer Report. 

Predictions say that the region's population of 617,311,000 will have around 220 million smartphone users within 3 years from a current 150 million users for 2015, reaching a total of penetration of 36%.  Mobile phones are becoming the forefront for internet usage.  Brazil today has the highest absolute numbers of Smartphone users 49 million, making it bigger than the UK with 40 million, considering that mobile usage is only has 37.6% penetration in Brazil in contrast to a nearing saturation of 71.7%, in the UK.

Pedro Silva, CEO, IVC - (Instituto Verificador de Circula??o)

Ad Blockers Latin America are also growing in adoption, the trend follows with 4 countries that fall into the top 30 countries with ad blockers. Colombia is at #20 with 28% of video time ad blocked. Chile and Mexico come in right before the U.S. with 26% ad blocked video time and Argentina and Ecuador both count with 23% according to an article from Portada-Online.

Ad blocking on desktops has higher rate than users on mobiles. As mentioned by PageFair, “mobile ad blocking is still very underdeveloped,” a situation that may change following Apple’s recent support for ad blockers in iOS 9. Latin America is mobile-centric, the communication dynamic between a brand and consumer vastly differs compared to the United States or any other market, making it difficult to draw a parallel between each of them," says Mike Villalobos, Head of U.S. Multicultural and Latin American Sales at Virool.

In Brazil, which is Latin America’s largest Digital Advertising market, with US$4,605 Billion in Ad Spend for 2016, is the market with more to lose and hurt Publishers.  The Brazilian IVC, the institution that audits media audiences and the American Alliance for Audited Media (AAM) and their AdBlock Detector estimates that 15% of Brazilian publishers have ad campaigns that are not shown because of  Ad Blocking software.  

"In May 2012, before the paywall, the average digital subscribers was 30 thousand day.  In April 2014 we reached 124,000 subscribers, an increase of 310%,"

Murilo Bussab, Circulation & Marketing Director, Folha de S.Paulo

They also estimate that 10% of Brazilian internet users have some kind of ad blocker in their browsers. “There are two immediate problems we need to understand: how far do ad blockers reach among the Brazilian inventory and how much income is lost”, said Pedro Silva, executive president of IVC.  IVC also found that in some websites, the audience with ad blockers surpasses 30%; whereas other publishers can be proud of only 6% of their audience using the same software.  

The good news for Newspaper groups in Brazil, is that about 50% of publishers have implemented a paywall, initially led by Folha de S?o Paulo, Brazil's largest Daily in terms of circulation, having launched it back in 2012.  Brazil's largest media group, Grupo Globo quickly followed with a paywall 2013 for it's InfoGlobo Newspaper division.   Folha certainly is a shinning example in the region.  "In May 2012, before the paywall, the average digital subscribers  was 30 thousand day.  In April 2014 we reached 124,000 subscribers, that is, an increase of 310%," says Murilo Bussab, Circulation & Marketing Director at Folha de S.Paulo.  Other Newspaper groups have  followed suit, in one form or another, generally with rigid in house built technology.

Ken Doctor, President, Newsonomics

The rest of Spanish speaking Latin America needs to really start launching new models.  The only publishers in Latin America to that has that has launched a model to compliment ad revenue is El Tiempo from Colombia, with a metered registration wall, that will soon convert into a digital subscription model.

Ken Doctor, President of Newsonomics, who is considered a leading news industry analyst, and author of “Newsonomics: Twelve New Trends That Will Shape the News You Get”  has studied various Newspaper groups.  The data strongly indicates that readers have a high willingness to pay for quality journalism, advocating models that target the most engaged users.  On average, that can be somewhere between 4 and 10 percent of the most engaged may become subscribers, as his latest findings show.

Piano's Trevor Kaufman, anticipates much new testing in 2016.  Expecting publishers overall situation to improve as various niche tests move into the marketplace and new strategies evolve to compliment established revenue models. 

With the rise of Ad Blockers, Leading publishers in the region are considering complimentary and new revenue models, but generally hesitate in executing, as they fear that any loss of eyeballs will benefit their their competitors.   It is an on-going debate which will continue and prompt publishers to rethink their monetization strategies, that go beyond Page Views and CPMs.