Adblocking unleashes anxiety across the advertising industry

Matthew Garrahan and Hannah Kuchler in New York and Robert Cookson in London

www.ft.com

October 5, 2015 1:21 pm

New filtering technologies figure to disrupt conventional marketing models
AdBlock

The marketing industry knows how to throw a party. Stars ranging from musicians Mark Ronson and Snoop Dogg to the actor who plays Big Bird on Sesame Street joined 95,000 advertising luminaries in New York last week for a week of seminars, special events and schmoozing.It is no surprise that an industry so polished in the art of persuasion would put a positive spin on its predicament. But not even Mad Men’s Don Draper could hide the anxiety sweeping the world’s advertising hubs of Manhattan’s Madison Avenue and London’s Charlotte Street.

Digital advertising, the industry’s fastest growth area, is under attack from twin forces: software that enables viewers to block ads on their smartphones and computers, and online fraud, which distorts the measurement of video views and impressions, siphoning off spending to a network of shadowy middlemen.

Adblocking, the most recent threat, has gained traction and visibility since the launch of Apple’s latest operating system in September, which can run the software. Designed to filter ads that slow page load times and annoy users, the adblockers released to date have been among the most popular available from Apple’s App Store.

Last week, Digicel became the first mobile operator to start blocking ads on its network. The Caribbean-focused network owned by Denis O’Brien, Ireland’s richest man, said it had started in Jamaica and would introduce the technology to its other markets in coming months.

But the effect of the latest adblocking software, alongside those programs already available on PCs and laptops, could have ruinous implications for the companies that rely on digital advertising, such as online publishers. Estimates over precisely how ruinous vary wildly: UBS said last week that adblocking would cost the advertising industry $1bn, while a report in recent months from PageFair and Adobe put the figure for 2015 alone at $22bn.

Whatever the correct figure, adblocking is bringing a wave of disruption to the industry. “Online advertising is about to be fundamentally restructured in a way that will result in massive consolidation of both content buyers and advertising platforms,” Goldman Sachs analysts wrote in a research note last week.

Adblockers are primarily a threat to sites on the open web, which rely on third-party ad networks — such as those owned by Google — to sell and deliver ads to their sites. The most commonly used blockers do not work on so-called walled gardens, such as Facebook’s own app.

“It’s not quite as significant a threat as people have said,” says Sir Martin Sorrell, chief executive of WPP, the world’s largest marketing services group. “But am I worried about it? The honest answer is yes.”

Online news publishers would appear to be among those most in the line of fire, and some hope the prospect of blocking will encourage advertisers to develop better ads that do not slow page load times — particularly on mobile devices. “Good advertising matters,” says Jim Bankoff, chief executive of Vox Media, which owns a network of sites, including The Verge, Eater and Re/code. “By that I don’t just mean advertising that is creatively strong. Advertising shouldn’t hinder or slow down the experience.”

Some advertising executives are putting their faith in the development of technologies that either help adverts get past the adblockers or suppress the content so the users of such technologies are prevented from looking at those sites.

But, with adblockers such as Purify flying off the virtual shelves of Apple’s App Store, will any corrective action to improve mobile advertising experiences come too late?

Bob Lord, president of AOL, believes the industry is heading into a “war of technology”. “Content is expensive to produce, so ultimately it is a consumer choice: do they want a subscription-based content model or an ad-supported model?” he says. “Technology will get to the point where those with an adblocker are not going to get free content.”

If actions such as these fail to slow the adoption of adblocking software then publishers are likely to move more of their content and advertising to their own apps or protected systems — such as Facebook, which recently launched its Instant Articles news service.

“Advertisers will continue to advertise,” one publisher says. “But adblocking hurts the open web. And who makes the most money on the open web? Google.”

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The technology group, for its part, has acknowledged that adblocking is a problem and said last week that the industry needed to work together to find a solution.

The search ads that generate most of Google’s revenues are among those filtered by adblocking software.

“Google has the most to lose,” says Sir Martin.

The company could take steps to thwart adblockers by preventing users who have installed the software from using YouTube, he adds.

If the problem goes unaddressed, the imbalance that exists in the online advertising market will continue to exist. Mobile use accounts for 24 per cent of US media consumption time but only 8 per cent of advertising spending, according to Kleiner Perkins Caufield Byers, the private equity firm. It estimates that this gap in the US is equivalent to a $25bn opportunity. The advertising industry will hope that it is not a missed one.

Measuring marketing messages
Gauging the effect of advertising has always been tricky, whether on print, radio or television.

The internet was supposed to offer more accurate forms of measurement. But bots and online fraud have distorted the picture, making it more difficult than ever to calculate the efficiency of digital campaigns.

Accurate online measurement of television programming is also proving to be fiendishly difficult. Media companies, such as Viacom and CBS, have complained for months that Nielsen, the market research group, does not include online consumption in its audience ratings, on which television advertising is based.

But the market to provide accurate audience data are becoming more competitive. The merger of ComScore and Rentrak, which was announced last week, will create a single company capable of measuring viewing, from film to television to online.

WPP, the advertising group that holds minority stakes in ComScore and Rentrak, has pushed for more accurate audience ratings, partly because two of the largest platforms for online viewing — Google and Facebook — have their own ratings system for video views.

“The measurement issue is very serious,” says Sir Martin Sorrell, WPP chief executive. “You can’t have the players refereeing the match.”

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Posted on October 6, 2015, in ConspiracyOz Posts. Bookmark the permalink. Leave a comment.

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