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22 October 2015

Ad blocking: The rise of a sustainable new business model?

Ad blockers have been around for a couple of years already but the public discussion has become quite intense in recent weeks only. But can ad blockers really disrupt the whole business model of advertisers and publishers? I personally think they can.

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Faced with an outdated business model, publishers are in search of alternatives. They are the music industry in the year 2015. And they have to act now.

With free ad blocking or filtering software it becomes possible to remove advertising content from websites. This can include text, pictures, animations and embedded audio or video. In practice this means you should not watch annoying ads any longer before watching YouTube videos or reading an article without first clicking some ads away. Besides the benefit of an advertising-free web experience, an ad blocker makes your (mobile) web browser faster using less bandwidth and thus less internet data. Ad blockers mean more privacy too: your click behavior becomes more secure as advertising companies cannot follow you any longer across different websites.

The software extension already exists for a couple of years for web browsers like Safari, Chrome and Internet Explorer. But in September, Apple released iOS 9, the newest iPhone and iPad operating system. It is now possible to download ad blocking applications for mobile web use. Since Apple brought ad blocking to the mainstream, usage has only exploded exponentially.

A recent report by Pagefair and Adobe mapped out the impact of ad blocking: the global use of ad blocking software has grown by 41% in the last 12 months. Use in Europe grew by 35% up to 77 million users. In Belgium, 12% of internet users are using this software. In 2015, the global lost revenues of ad blocking were estimated USD 10.7 billion and this number is expected to double next year. There is little time left to react.

But why did this all happen?

From the outset of online advertising, publishers have been maximizing advertising revenues in return for the free content they provided via their platforms. At the same time, they wanted to collect more audience data that they could then re-use to push advertisement. This combination caused a snowball effect with more and more intrusive and even aggressive ads asking for attention. The open web was transformed into a muddle of irrelevant content with a declining audience attention and trust as result. Users are taking action and the flood of ads will ultimately kill itself.

Publishers are reacting in different ways to this development. Visitors of the German news website Bild.de have now two options: turn off the software or pay 2.99 euros per month to remove most ads. Visitors who do not want to pay, can no longer visit the website. In Belgium, De Tijd and Tweakers ask their visitors in a polite way to turn off the software as this affects their business model. All these solutions are not sustainable on a longer term.

But this development does not have to be something negative. Instead, it can be a great opportunity for online publishers. They can be at the forefront of this development and determine the principles of today’s online advertising and its business model. Without any doubt, publishers will have to start looking for new revenues streams. One way is to reshape the rules of advertising. Users should be respected and enjoy their web experience. No more intrusive ads taking over webpages or data capturing without informing visitors. Ads should be simple and transparent and so compelling that people don’t want to block them. The rise of native advertising will only be one solution. Apart from this, publishers should start thinking about non-aggressive ways to monetize their content. The Dutch start-up Blendle aggregates different articles of newspapers and sells them at a cost of 20 cents per article. There are no pay walls and you only have to pay for the articles you actually read. And if you don’t like the article, you get your money back. This model of micro-payments is a great example how the reader and publisher alike can benefit qualitative content.

Ad blocking is not a war against the publishers. It is a wakeup call driven by the most influential people: the consumers. Ad blocking providers are already pushing innovative efforts to create better ads. It is now the turn of the publishers and advertisers to react in this new ecosystem. Will they grab this opportunity and reshape their business model in a sustainable one?

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