Making sense of ad blocking

financialexpress.com

With ad blocking becoming a strategic obsession, publishers and advertisers are focussed on rescuing online advertising and creating multiple monetisation models

Online advertising trade body Interactive Advertising Bureau (IAB) recently recommended publishers making a DEAL (detect, explain, ask and lift or limit) with consumers using ad blockers. These recommendations come at a time when a majority of publishers such as The New York Times, The Washington Post, Forbes, The Guardian, Slate and  Le Monde are experimenting with ways to limit exposure to ad blockers by asking consumers to either purchase the subscription or whitelist the site for an ad-light experience.

With no quick industry fix in sight and more publishers upping the ante against ad blockers, is the viability of the web as a platform for the distribution of free, ad-supported content under fire? If figures are anything to go by, there were nearly 198 million monthly active users (MAU) of ad-blocking software globally as of Q2 2015, and even though they represented only 6% of the global internet population, ad blocking was estimated to have cost publishers nearly $22 billion during 2015, which was 14% of global ad spends. The global cost of ad blocking is expected to be $41.4 billion in 2016. (Source: PageFair and Adobe 2015 Ad Blocking report).

Mind you, the phenomenon is no longer limited to iOS 9, which works only on Apple’s more recent 64-bit devices and Safari browser. Third party ad blocking apps are now available on Google Play Store, and these promise enhanced privacy, faster page loads and lower usage of battery and data.

The impact is expected to further grow given that a large chunk of online browsing and content consumption is happening on mobile devices. Poorly designed, data-heavy advertisements that fill the whole screen and slow down page load time are only expected to lead to higher adoption of ad blockers.

The death of free web content?

Ads exist to fund free content. In fact, more than 80% of apps on app stores (iOS and android) are for free. Most of the publishers’ online revenue comes from ads and the only way to make money is through ad revenue, in-app purchases or charging for content. “90% of app revenue in the digital ecosystem is driven by free apps. Ads are the only way in this cluttered ecosystem to make money,” says Arun Pattabhiraman, VP & global head of marketing, InMobi.

So why do users block ads? For better online experience, faster surfing of internet on mobile, less data charges — and not because they do not want to see any advertising. “After all, advertising is also information and if relevant and in context, it is ‘actionable information’,” says Gurmit Singh, vice president and managing director, Yahoo! India. In a 2014 study conducted with Mindshare, Yahoo! found that over 80% of smartphone users in India intentionally click on a mobile advertisement while 30% of them use mobile devices for pre-purchase research. “This shows that users respond well to ads that are of value to them. What they don’t want is being carpet-bombed by ads,” says Singh. The push is towards a better experience for consumers and their right to say no to an ad. “The tussle is between the consumer and the publisher: what are the rights of the publisher to say his app will have ads and what are the rights of the consumer to say she wants access to content without ads,” says Anuj Khanna Sohum, founder, chairman & CEO, Affle.

The balance of power

Online news/content publishers are expected to see the maximum impact from ad blockers as most of their revenue comes from ads. No wonder then that globally publishers are coming out against this phenomenon by blocking its patrons. “With a majority of readers consuming content on mobile, its smaller screen size and lower ad rates impact both yield as well as inventory,” says Nikhil Pahwa, founder, editor and publisher, Medianama.

Mobile has lower ad rates and less free space for banner ads. Essentially, this means publishers make less money on the mobile than they do on the web. Also segmentation into mobile web and apps is impacting publishers. “With ad blockers, publishers will make even less money on mobile despite the rise in consumption,” says Pahwa.

Coupled with low yields in advertising, and advertisers asking for more and more space, publishers are not in a position to negotiate. In fact, publishers are said to be under pressure to carry obtrusive ads. “Publishers will have an immediate hit in terms of banner advertising and so the ad network gets impacted too. But it is a low value, high-irritation segment. That is why they have led to the rise of ad blockers,” says Prasanna Singh, director, impact and sales, YourStory Media.

“Currently, ad blocking penetration is around 5% in India. It impacts not just ad formats but also other java script driven widgets. One way out is to block the content for the user of an ad blocker,” says Sandeep Amar, CEO, India.com.

Also, a large amount of news consumption is taking place on mobile through social media, such as Facebook. However, Facebook’s newsfeed does not serve all the stories to all the people who might have otherwise read it. “The switch away from web to app and dominance of social media platforms like Facebook, have led to a storm like situation right now. It remains to be seen how the publishers get out of it,” says Pahwa.

It is not just content publishers but also the gaming industry that is facing the heat. In fact, according to the Adobe and PageFair report, visitors to gaming websites are significantly more likely to block advertising. There are two kind of ads displayed on gaming apps. One is interstitial ads or full screen ads that cover the interface of their host application. The

second type is reward videos, which consumers can watch to reach the next level or score more points.

While reward videos are a part of core app design and cannot be blocked by ad blockers, interstitial ads are intrusive. “From revenue point of view, interstitial ads are a poor converter of monetisation. A majority of conversion happens at reward videos. Interstitial ads need to be blocked,” says Manish Agarwal, CEO, Nazara Technologies.

The shift towards native

Clearly, the problem is not advertising but the format it is delivered in. From a user perspective, ad blocking is more of a feedback against disruptive ad experiences. “If poor ad experiences have led to ad blocking, consumer-friendly ad experiences can negate its adoption. Publishers need to understand consumer behaviour patterns and incorporate these into advertising,” says Zafar Rais, CEO, MindShift Interactive.

Native advertising is fast gaining ground with publishers and brands as the format works very well with mobile screens. “The success of native clearly shows that ‘blending in’ is the new ‘standing-out’ in online advertising,” says Singh of Yahoo! India. The advantage of native is that it lends itself to many different forms depending on the content in which it is immersed. It could be text or video or image, ranging from in-stream advertising to in-game native formats. “Consumer data is critical for creating engaging content.The best way is to make use of data and technology and target riveting ads. Programmatic content is the need of the hour,” says Rohan Patil, managing director, AppLift India.

However, native doesn’t mean that one disguises an ad in the form of an article or news. “One needs to reimagine the ad,” says Siddharth Puri, CEO, Tyroo. Native ads can drive improved results in key metrics across the sales funnel, from high-level measurements such as brand awareness to low-funnel conversion activities like keyword searches. “As compared to display ads, native ads are more effective — a user is 3.6 times more likely to conduct a branded search and six times more likely to run a related search after seeing a native ad,” says Singh.

The positive side of ad blocking is that publishers are pushing for content marketing, thus forcing many to invest in the content in a bigger way. But a word of caution: “Native advertising isn’t the ideal way. Unless it is a native, in-stream ad, it is just not scalable,” says Pahwa. “You cannot replicate the same branded content across multiple publishers like a banner ad.”

In addition to content marketing, social media marketing and in-app advertising are also seeing a major push due to their non-intrusive formats. “Social media marketing cannot be impacted by ad blocking at least in India for now. For example, advertising on Twitter is through promoted tweets and not banner ads and therefore not intrusive. Even large publishers are using content marketing to engage users,” says Akshay Mathur, senior VP, Komli Media.

With more and more content being read on social media and platforms like Facebook’s Instant Articles gaining steam, publishers need to build direct relationships with readers and develop sources of revenue other than just advertising. “Publishers will have to look at other monetisation models because it cannot be just banner ads, or purely native ads or even purely having readers pay for content,” sums up Pahwa.

Studies show that users respond well to ads that are of value to them. What they don’t want is being carpet-bombed by ads
Gurmit Singh
VP & MD, Yahoo! India

With ad blockers publishers will make even less money on mobile despite the rise in consumption
Nikhil Pahwa
Founder, editor and publisher, Medianama

90% of app revenue in the digital ecosystem is driven by free apps. Ads are the only way to make money
Arun Pattabhiraman
VP & global head of marketing, InMobi