Advertisements are one of the main influencers of demand for a business; investments put into advertising allows businesses to make more people aware of the goods and services they offer and encourage greater demand and, in turn, increasing revenue and profits. The internet, a platform which allows billions of users to visit thousands of websites to connect and keep up with the rest of the world, reveals an ideal way to advertise. Facebook is one of the many companies which benefit greatly from online advertising. To be more specific, in the second quarter of 2015, the social networking site made approximately $3.8 billion from advertising alone, making up about 95% of its total revenue. 62% of that came from mobile traffic. This shows the lucrativeness of internet advertising and has encouraged all kinds of businesses, big and small, to invest time, effort and money, into online advertising.
However, the advent of ad-blocking technology, which allow users to filter out advertisements on webpages when loading them, has threatened the business models of many firms. Despite this technology being in existence for a while, only being used by a minority initially, the growing nuisance that internet adverts have become, with banners poping up out of nowhere, videos playing without pressing play and pop-up windows cluttering computer and even mobile screens, has meant that the demand for applications which strip web browsing of this bothersome experience has grown tremendously. Since Apple allowed a host of content-blocking Safari extensions to circulate on the App Store earlier this year with IOS 9, the mobile platform has become increasingly plagued with devices utilising the technology to make the internet essentially ad-free. It only took a day after the release for content-blocking apps to storm towards the top of the app charts globally. This creates a new challenge for content providers and publishers who rely heavily on online advertising to provide remunerative revenues. The ad-blocking war is thus very much underway, and though the outcome may not be exactly clear right now, the result will most definitely be drastic.
The Economic Effect
If you are going to block off one of the ways in which businesses attempt to increase demand and profits, there will inevitably be losses as a result. The question is to what extent does it do so. Across the globe (according to research conducted by PageFair) ad-blocking on the internet rose by 41% from Q2 of 2014 to Q2 of 2015. Although this figure only accounts for a mere 6% of the total global internet population, ad-blocking usage still managed to accumulate $11.7 billion worth of losses worldwide last year, and is expected to rise to over $40 billion in 2016. In more specific terms, with content-providers using a payment system for web display ads which is based on the cost for a thousand views (cost per mile, aka CPM) as opposed to the number of clicks, a website which manages 10 million views in one day, with three ads per page selling at a rate of $5 CPM would suffer $15,000 worth of losses daily. That’s $450,000 a month, which totals to over $5 million in a year. And with a number of internet users utilising ad-blocking extensions on the rise, the losses will only rise. On that account content-blocking creates havoc for content providers. It has the potential to create a financial disturbance great enough that the potential profitability of the internet is cancelled out by the damaging dissipations of ad-blockers.
However, there are some who point out that the suffering content-providers endure as a result of such adversity is exaggerated. Eliminating ad-blockers would not necessarily lead to great losses in revenue. Much of the analysis produced by PageFair is based on theoretical future ad sales, hence, it has been criticised for its assumptive information. Furthermore, it is wrong to assume that eliminating content-blocking software would allow ad revenues to remain unaffected. Realistically, those who do use ad-blockers most likely would have had a prior inclination to dismiss or ignore the ads which pop up on a webpage or might choose to avoid visiting the webpage altogether, and thus eliminating ad-blockers would only serve the purpose of increasing ‘dud views’ (where users visit a webpage and never attend to the ads shown). With that, advertisers will only pay for ads if they feel that the expected benefit they expect to receive as a result of such investments would outweigh the cost. Increased ‘dud views’ then would result in content providers paying less for ads. This, therefore, proves that perhaps the argument that ad-blockers result in big losses for content-providers is based on a false premise.
Some have used real world analogies to try to show how ad-blocking creates negative economic impacts. However, many of them are fallacious in their attempts to portray the apparent trauma of ad-blocking. In an article from 2010, Ken Fisher, founder of the technology news website Ars Technica, compared the use of ad-blockers to the act of people eating out at a restaurant not paying for the food. This argument does not follow simply because users attending to advertisements on a webpage is not a compulsory economic obligation like paying for food at a restaurant. When people go out to eat, they are paying for a service, with the expectation that the money that they use to pay grants them the benefits of the good or service they have a direct interest in. This orthodox does not necessarily follow with online advertising, because when an internet user visits a website, they are not obliged to attend to the adverts on the page. Advertisers are banking on users to notice their adverts out of hope, and thus to expect consumers to respond to ads in the same way that consumers pay for their food at a restaurant is fundamentally inaccurate. Investments in online advertisements is a gamble that businesses feel worth taking, but they cannot expect sufficient returns all the time even without ad-blocking software being used.
All this underpins the rather speculative reasoning behind those arguments which suggest that the utilisation for ad-blockers results in harmful economic losses for businesses. Though the true economic effects remain to be seen since the rapid increase in the popularity of ad-blocking extensions is only recent, and so more time will be needed to assess the true impact economically. But time is not necessarily needed to address one of the main drivers behind the strong demand for ad-blocking technology.
Getting To Know You…A Little Too Well
Ad tech (the technology behind targeted online marketing) gives content providers valuable information about users on the web, to then dissect this information and produce personalised and very specific advertisements, which then tread on the hills of internet users as the voyage across the world wide web. Some advertisements may only exist in quite inconspicuous areas on a webpage, such as within the page margins or in the corners. Others are far more direct, opening up as their own window which flash and harass users, only to drive them to quickly close them down aggrieved and perhaps a little startled. Ad tech, therefore, provides another reason to back an argument for privacy on the internet. Though it only utilises the openness of the internets’ structure, and the lacking ability to keep anything online private. The web was never designed to keep information private, thus, anything users search, any website they visit, and any information communicated through the platform is recorded and is easily accessible.
Content-providers argue that despite the infringements upon user privacy, it is very difficult to conduct business through effective advertising without the knowing what users are doing on the net, especially when more and more aspects of everyday life are being ingrained into the internet and technology. Stripping content-providers of such invaluable information, they may claim, rids them of a legitimate opportunity to attract greater consumer demand and therefore improve profits. Though on the face of it this argument may seem valid, it is ignorant to the fact that although adverts may be appreciated by users when they are acknowledged or notice them, conventionally those adverts have remained in their respective domains, and do not spread and invade the personal space of those consumers it attempts to attract. In other words, online advertisement goes too far in showcasing what a company sells or is in the marketplace for. When people buy a newspaper, they are attending to the stories contained within the document as a first priority, and may acknowledge the ads which are in the paper too. The expectation is that they do not expect those ads to reflect their interests very accurately or frequently. Claiming that targeted advertising helps alert internet users of the relevant goods and services that they would be interested in is erroneous because the way in which this is achieved inhibits the right to privacy. A web browser is a private vehicle which users utilise to access the world wide web, and use protocols to request a document (a webpage) yet users do not necessarily visit a webpage to look for ads any more than people buying a newspaper just to look at the ads inside.
Furthermore, even if the ads produced as a result of targeted online marketing are relevant to the interests of the user, it does not necessarily mean a user would be any more interested in the product or service being presented. In fact, if a user recognises that those very adverts have only gained their accuracy by invading their privacy, then this breach of a basic civil liberty would most likely deter them from ever attending to the ads being presented.
Consequently, content providers are suffering from the damage of their own fire. A growing amount of internet users are using ad-blockers because of the intrusive and ineffective nature of the online ads which they experience. Users want to be able to use the internet as a tool to learn about and connect with the world, and they appreciate advertisements the same way they would if they appeared in a newspaper. Yet when these ads intrude their private space, they turn off consumers, just as they turn on their ad-blocking extensions in an effort to never be bothered by annoying and nosey ads again.
The Customer Is Always Right
The growing dissent of online ads and the resulting growth in demand for ad-blocking software to attend to this annoyance should provide a signal to connect providers that the way in which they go about advertising is simply not working. If the very users they are trying to attract are trying to find ways to avoid the poor attempts to gain their attention, then a different approach is probably needed. In addition, an increasing amount of ad views are not coming from human interactions. In this digital age, around 11% of online ads and nearly a quarter of video ads were viewed by software and automated bots, according to research by the Association of National Advertisers conducted in 2014. This thus paints the picture of quite dismal prospects for online advertising, despite its apparent lucrativeness. Now the huge investments going into internet advertisement distort the actual benefits of some of the methods.
Moreover, internet users are inclined to discard ads, particularly on mobile devices, not only because they are annoying and invasive, but also because they use up data. The most popular content-blocking app available on the Apple App Store, known as Crystal Ad-Block, claims that using the app could save users up to 50% on their data plans and load pages four times faster. This indicates how the ads put an unnecessarily heavy toll on data plans, hence providing further incentive for consumers to download an ad-blocker.
Moreover, the dangers of malvertising (more on page 9) present another strong case for ad-blockers. Illegitimate advertisements placing numerous internet users at risk does not exactly help the argument suggesting that ad-blockers serve only the purpose to stifle business. Malvertising is on the rise on mobile platforms as well, not only making this parallel with the increase of internet traffic sourcing from mobile devices, but also providing yet another case for the use of content-blockers both on desktop and now on smartphones, and tablets.
Consequently, the strong case for using ad-blockers will no doubt cause shifts in online marketing. It is probably the biggest boycott ever in human history, and content-providers will struggle to get around it. Many have looked to the helping hand of the law to provide some sanctuary, though even this has not been successful.
In May 2015, a German broadcasting company known as RTL lost out in a legal battle to Eyeo, the makers of content-blocking software called AdBlock Plus. The court dismissed the claim that the ad-blocking software promoted anti-competitive behaviour since consumers could make the choice for themselves as to whether to download the content-blocker or not, and Eyeo lacked sufficient dominance of the market to prevent publishers from finding adequate users who would see ads. This ruling in Munich is one of the many court losses publishers have suffered in the midst of the ad-blocking phenomenon. Some have used the principles behind tortious interference to expose the legal implications of ad-blocking. This argument states that “tortious interference with contract rights can occur where the tortfeasor persuades a party to breach the contract against the plaintiff, or where the tortfeasor disrupts the ability of one party to perform his obligations under the contract, thereby preventing the plaintiff from receiving the performance promised”. This suggests that those software developers which produce ad-blocking software are breaching a ‘contract’ between the internet users and the publisher. However, if the terms and conditions of using website are not presented in a clear or tangible form, it makes it difficult to prove that this is the case. Burying such details in long and complex terms and conditions documents, which some companies may ask you to comply with before using their services, filled with incomprehensible legal jargon (for the average consumer at least) is often the so called ‘contract’ that is apparently being breached. It is here where the questioning whether the terms are being presented in a tangible format which is explicit and clear.
So far only a few legal cases have had to deal with the issue of ad-blocking. Different jurisdictions may have different answers, but the case for permitting the use of ad-blockers is strong. Even after a long string of intense legal cases, content-providers still may not end up victorious. Ad-blockers are winning the battle for the moment, and it looks like that they may come out on top. The consequential shift, as a result, will be a much-needed one.