Kirk Klasson

Ad Blockers: Who’s Zoomin’ Who?

Ad blockers, content and consumers. Oh, My!

Well, here’s something that you don’t see everyday.

Marco Armet, a coder, blogger, Tumblr co-founder and inventor of an enormously popular app called Peace just had a change of heart and withdrew his ad blocker from the Apple App store just when it was poised to realize enormous success with the release of iOS 9.0. Not only that, he insisted that people who had purchased the application be able to have that purchase refunded and Apple is fully cooperating.

To understand why he did this he released a statement that in part read, “while they (ad blockers) do benefit a ton of people in major ways, they also hurt some, including many who don’t deserve the hit.”

Apparently, the folks that don’t “deserve” the hit are the content publishers who provide free content and employ ads as a means to derive revenue. The ads provide a form of subsidization which keeps the content providers in business, businesses which by the way enjoy other generous forms of subsidization along with substantial market capitalizations.

To understand the gravity of Marco’s concerns one has to have more than a superficial grasp of what is going on in the mobile ad business and why ad blockers, along with Do-Not-Track and private VPN’s, are suddenly taking off and exactly who is getting fleeced. Contrary to Marco’s assessment, it probably isn’t the content publishers or the VC’s who back them.

Advertising has always been part of the content game, long before there was an internet and social media and mobile devices, all of the traditional media incorporated ads as part of their revenue model (see The Search for Eldorado – September 2011). One fundamental difference, however, was that the consumption of traditional media was largely anonymous, the publisher might know that you are consuming the content but knew little else about what you saw and what you did with what you saw. The consumption of content on mobile devices is not; past the landing page, every click is tracked. Another major difference was that paid for media or subscription based media had an obvious and explicit cost to the consumer. So it was the consumer’s choice as to what constituted a fair price for the content they wished to consume. And the same is also largely true on the internet for sites with subscription-based content. However, when it comes to ad funded internet media, mobile or fixed, social and otherwise, the consumer has very little idea what part of the costs they subsidize and how that subsidization occurs. (see Social Subsidization and Diminishing Returns – March 2015).

When it comes to internet advertising a major shift occurred with the advent of mobile devices. Back in 2010, the value of mobile device advertising was only about $500m. By the end of 2013 it had reached over $17b and it is now on track to eclipse the value of TV advertising by the end of 2017, a veritable bonanza for ad companies of all stripe, brokers, creators, analysts, as well as the content, entertainment, media providers who are out there capturing all those meandering eyeballs. It was only a matter of time before your average user started to notice that their browsing experience had suddenly become appreciably degraded due to the ever-increasing load of ads that were trying to cram their way onto their mobile devices. Sites that used to resolve and display in a few seconds were now downloading and reloading for as much as 30 seconds, way past the point when users begin to abandon sites. According to Radware, a cloud-based application delivery firm, 64% of smart phone users expect sites to be rendered in 4 seconds or less and that 85% of mobile users expect better internet performance than they experience from a desktop. Site and shopping cart abandonment skyrocket after about 8 seconds. Yet if you look at what has been happening with your average web site, payload and complexity have increased enormously.

Back in 2010 your average web page was about 650kb and by 2013 it had blossomed to 1.5mb. At the same time the composition of most sites has become increasingly complex with many sites crammed with scripts and as many as 90-100 separately sourced components. So, for those of you keeping score, rendering your average web page currently consists of vastly more sources with morbidly fatter payloads, knit together by dozens of scripts and programmatic idiosyncrasies and we haven’t even gotten to the browser which has to sort this all out before the content gets presented to you. Radware estimates that network latency to download all this stuff might be about 1-2 seconds and the rest of the delay is attributable to the browser trying to put humpty-dumpty back together again.

A couple of caveats, some quid pro quos…

Not too long ago, the New York Times took a whack at why ad blockers had suddenly become so popular and what they discovered was quite simply astonishing.


Source: New York Times

The above example shows that, all up all in, takes 33 seconds too download while, without the ads, the editorial content only takes 7 seconds. A difference of 16.3mb vs. 3.5mb. So one might conclude that either has the most patient subscribers in the world or, given expected rates of abandonment, possibly the fewest.

Data published recently in a paper entitled “Truth in Advertising: The Hidden Cost of Mobile Ads”, researchers from the University of Southern CA, Queen’s University and the Rochester Institute of Technology, confirmed that indirect costs associated with all this gunk are mounting up fairly substantially. They found that apps with ads on average consume 48% more CPU time and 79% more network data. Just as important, 23% of mobile app maintenance is directly attributable to ad integration.

So it should come as no surprise that ad blockers are one of the fastest growing categories of applications out there, much to the consternation of content providers who rely on ad revenue entirely or as a means to augment subscription based revenue.

Screen Shot 2015-10-17 at 10.52.30 AM

Source: PageFair and Adobe

Ultimately, the consumer bears the cost for all of this intrusive messaging whether it be indirectly in the cost of their mobile data plans, the sluggishness of their devices, exposure of their on-line identity and behavior or the products and services they consume whose costs include all of the direct advertising expenditures, mobile, fixed or otherwise, that may or may not have influenced their purchase to begin with, something few advertisers can actually reliably establish.

…let the Wookie win

Back in July of this year Google decided to stop using interstitial ads in promoting its mobile Google + offering. “Interstitial” is digital ad speak for full page ads that display before the user is granted access to the content they thought they were being redirected to, a common digital advertising practice. What Google discovered is that 69% of users would abandon the search immediately upon receiving the interstitial ad. So, essentially, Google decided to block their own ad rather than have the users do it for them. Something other advertisers may want to consider and, indeed, some are.

The precise impact on publishers’ ad revenues from blocking has yet to be clearly established. Some indicate that it probably won’t become a concern until 25% of their traffic is actively blocking their ads, a threshold that might soon be crossed. Recently, Trendera, an internet research group, published a report that suggested that of active internet users 44% of males and 42% of females already use some form of internet ad blockers. Now these stats don’t necessarily square with the PageFair/Adobe report but they are obviously pointing in the same direction. So much so that both the ad blockers and the ad producers have suddenly blinked and are actively seeking some form of consumer accommodation.

Ad Block Plus, a popular blocker, recently announced the formation of a group dedicated to the production and distribution of acceptable ads that conform to what they consider an Acceptable Ads Manifesto meant to minimize intrusion and improve the users’ browsing experience.  Similarly, in a move that startled the internet ad industry, the Interactive Advertising Bureau or IAB announced a LEAN ads initiative for Light, Encrypted, Ad Choice, Non-Invasive ads at the same time admitting that they had promoted “technology to optimize publishers’ yield of marketing budgets” and in the bargain “steamrolled users, depleted their devices and tried their patience”.  Quite the admission.

…track ‘em and whack ‘em

It will be interesting to see where all this leads since many of the so-called consumer oriented initiatives such as Do-Not-Track have either stalled or meandered in a thicket of competing objectives and regulations. In addition, many tech companies who purportedly support consumer protections in the implementation of their devices and services also provide backdoors that defeat them. For instance, Ad Block Plus will white-list sites that conform to the Acceptable Ads Manifesto and it would be up to the user to understand this and opt out of their default settings which would allow the ads through.

According to the IAB, internet ad revenues are on track to exceed $55b in 2015. If 25-50% of those ads are subject to being blocked, there’s the distinct possibility that between $13-27b dollars will be squandered. That represents a huge opportunity and one that might become the germ of significant disruption.

The underlying assumption from all these ad dollars, all this invasive messaging, is that there is a provable influence on consumer behavior, a notion that could be debated ad infinitum. At bottom, advertising acts as a seller’s agent promoting goods and services with the hope of prompting and intercepting demand. What seems to be missing from the equation is a buyer’s agent that signals intent in return for incentives, economic or otherwise, on the part of the seller. It is conceivable that $27b of squandered internet advertising could produce a significant opportunity for economic arbitrage.

Years ago, there was a notion of intelligent personal agents effectively exploiting a semantic web exclusively for the benefit of consumers. More recently this idea was reprised in form of personal digital assistants such Cortana, Google Now and Siri. (see Prophets on the SILK Road – December 2012) In subsequent iterations, these personal digital assistants have been better integrated with other user on-line activities such as browsing a la Microsoft’s integration of its Spartan browser with Cortana or Apple’s deeper integration of Proactive and Breadcrumbs with Siri. In concept, this should be relatively straightforward, simply allow traditional tracking methods to be captured by the browser for use by personal agents but limit their exposure to and use by digital publishers and advertisers. The personal digital agents can then work on the user’s behalf to sort out things like taste, affordability, convenience, etc. and take that out of the hands and away from of the prying eyes advertisers. The $27b squandered by ad blocking can now be saved and returned to consumers in the form of additional incentives. Everybody wins. Well almost everybody. Maybe not the internet advertising businesses so much.

…Mr. Watson – come here…

A nascent example of this can be seen in IBM’s investment in Fluid to produce a personal shopping agent powered by Watson’s cognitive computing capabilities. Fluid has worked with shops like North Face to produce a more familiar consumer experience that factors in things like context, taste, locality, etc. While this is a laudable step, it still maintains the tradition relationship of the buyer and the seller since the technology is acting on behalf of the seller; it is not, nor is it intended to be, an agent on behalf of the buyer even though to some it might look like one.

However, in these early trials it is easy to see where this kind of approach might lead. Take health care for example. IBM is aggressively extending Watson to act as a diagnostic resource for healthcare providers, certainly a noble goal. But what it has yet to address is the economic consequences of improving consumer choice in healthcare. Once a diagnosis is produced, the healthcare provider steps back into the conversation and produces a non-competitive recommendation for healthcare services that the consumer blindly goes along with. Consequently, healthcare providers and insurance companies are making money hand over fist because the consumer lacks the information and leverage to make a better-informed, competitively based choice.

…whose dime is it, anyway?…

Many internet publishers believe that the benefits of freely provided content and services, subsidized by advertising dollars, make the internet what it is today and that tinkering with this would seriously compromise today’s internet experience. And they may have a point. But like it or not things are about to change as consumers take matters into their own hands to craft an on-line experience that isn’t cluttered with crap that they no longer wish to pay for, both directly and indirectly. So while the publishers keep chanting that the internet needs to be free, in truth it is not; consumers have always been paying for it, they are only just beginning to realize in what ways they have subsidized their use of it.

But a better way is emerging, one that provides consumers a richer more consummate experience based on their needs, not necessarily the needs of publishers and advertisers. And will the consumer still pay for it? You bet. But there is an increasing likelihood that consumers would furnish the provider of an intelligent personal agent, one that protects their identity and maintains their confidentiality, an equitable fee if they could merely lower the costs of goods and services by a modest amount.

So, as soon as that gets here, sign me up.

Graphic courtesy of Marvin and Warner Bros. Cool shoes dude!


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