For Publishers, Ad Blocking Is Painful But Don’t Call It An Apocalypse

alexmagninsellsiderThe Sell Sider” is a column written by the sell side of the digital media community.

Today’s column is written by Alex Magnin, chief revenue officer and partner at The Thought & Expression Co.

Ad blocking has all the ingredients for a hot story. There are clear good guys (us publishers, of course) and villains. A bombshell report showed big money is at stake. The hysteria is peaking with Apple’s announcement of content blocking in Safari for iOS, with many predicting an apocalypse.

Of course, ad blocking is a serious issue. But, with so much information and differing numbers surfacing so quickly, we need to take a step back. What we’ll find is a medium-sized problem that for most publishers is perhaps best prioritized somewhere between ad server discrepancy and viewability. It’s unlikely to see massive adoption on mobile, and growth on desktop is, in fact, slowing.

Ad blocking provides an easy effigy for our industry’s challenges, but even eliminating it entirely will save few businesses. It’s not an apocalypse, but another step in our evolution.

Making Sense Of The Numbers

The figures from third-party reports, ad-block provider statements and publisher data can help us gauge how big ad blocking really is.

PageFair and Adobe estimate (PDF) that 16% of the US online population, or 45 million US users, blocked ads in the second quarter of the year. In their 2014 survey (PDF), 27.6% of users said they blocked ads, including 41% of millennials.

A Reuters-sponsored report puts the number higher – 47% of US respondents claimed ad blocking, including 55% of those aged 18 to 24.

Adblock Plus, one of the top two ad blockers by a wide margin, claims 50 million to 60 million active users worldwide. PageFair pegs the number of active global ad blockers at about 200 million. If both numbers are accurate, Adblock Plus’ global market share stands at roughly 25% to 30%. But privately, some industry insiders peg its market share at more like 55%.

Looking at it a different way, PageFair estimates there are 48 million Firefox ad blockers. The Firefox add-ons store shows 21.9 million Adblock Plus users, which would give Adblock Plus a 45% share on the browser. These numbers don’t all add up.

Moreover, Adblock Plus recently stated a US usage rate of 4%. By my rough calculation, if we split the difference between 25-30% and 45-55% and say it has about 40% market share, the US ad-blocking rate would be 10% at most (not 16%, 27% or 47%), which is more in line with some publishers’ claims. CBS sees 5% for its sports site and 30% on gaming sites. The Daily Mail said 11% to 12%.

Each side has its angle. Perhaps the ad-block makers want to be big enough to do business with the likes of Google, Apple, Facebook and Verizon, but not so big as to ally against those that can change the game. Of course, recovery vendors do well with a big problem to solve. And publishers may not want to tell their direct sales clients that much of their audience is unreachable.

I look at all this and estimate that desktop ad blocking is around 10%. That’s a serious problem, but not an epidemic.

There is a hopeful fact hidden in the PageFair report: Desktop ad-block adoption is slowing. In the second quarter of 2014, ad blocking had grown 69% in the previous 12 months. By 2015, growth had slowed to 41%.

How Much Revenue Is Being Lost?

The headline figure in the PageFair-Adobe report: Publishers stand to lose $22 billion this year because of ad blocking, with $10 billion in losses attributed to US publishers.

But we can’t simply assume that, if ad blocking went away, $22 billion in global ad spend would drop into publishers’ laps. Ad spend is essentially a fixed percentage of GDP, between 1 and 1.4%. Advertising can’t get us to spend more than our economy allows. There’s a fixed amount of demand for ad space in the world, so if we increased supply 10% by eliminating ad blocking, CPM prices will go down, netting little benefit for publishers on the whole.

The buy side is not concerned because they have plenty of other ways to reach ad-block users and millennials, such as through TV, in-app, native and social. Jim Caruso, an SVP at Varick, said his company has had little trouble reaching the people it wants with ad campaigns.

But, for publishers the pain is real. We can’t take the macro-market approach too far. More high-quality inventory would get used. So, with the US digital display market around $20 billion and ad blocking at about 10%, the total opportunity in the US might be more accurately estimated at $2 billion. If we give half of that away to macro-market considerations, then we’re looking at somewhere around $1 billion in true loss – far from the headline figure of $10 billion in lost revenue for US publishers.

What Will Happen With Mobile?

The next plot twist will be mobile, where Apple is allowing developers to build content-blocking apps extensible to Safari on iOS. Some worry that iPhone users will go to the app store en masse, download an ad-blocking app and use Safari ad-free, spelling doom for publishers in mobile.

The reality is more complex. Rather than simply downloading an ad-blocking app, users must take a two-step process to block ads, which may dampen mainstream adoption.

And although a large amount of iOS web browsing happens inside of Facebook app, how content blocking will manifest there is complicated. Facebook would have to upgrade the version of Apple’s Webview, on which it bases its own in-app browser, to the new Safari View Controller, or Apple would have to stop supporting the old version. Until one of those things happen, links clicked via the mobile Facebook app will be unaffected by content blockers. For some socially focused publishers, links from Facebook is the whole mobile ballgame.

Finally, and unfortunately, there isn’t much spend in mobile for publishers to begin with. Mobile will account for more than 70% of digital ad spend by 2019, but 85% of mobile time is spent in apps rather than the mobile web – and 84% of that is spent within five dominant apps. As a result, mobile ad blocking will not likely have an industry-shaking impact.

Again, for publishers, the pain is real. But aside from ad blocking, they are feeling the pain of a 20-year evolution that has commoditized content production and liquefied distribution. Ad blocking is not an apocalypse to be tackled alone. It’s another signal for publishers to evolve business models.

There are good suggestions and practical solutions out there, but a realistic view of the problem makes a good place to start.

Follow Alex Magnin (@alexmagnin), Thought Catalog (@thoughtcatalog) and AdExchanger (@adexchanger) on Twitter.

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1 Comment

  1. Alex, thanks for this well written article – I agree that the ad blocking problem isn’t at epidemic levels yet, however I think it’s the sudden growth of ad blocking and all the new catalysts on the horizon to keep it growing that’s quite scary to the publisher side. 10% and stable is one thing, but 10% and growing at double-digits before the press-blitz and mobile blockers in the app store feels more serious to me.

    I recently conducted a survey of digital publishers on their ad blocking rates, as well as what they plan to do about ad blocking, which I think is what will really be the story over the next year. You can read the findings on my blog:

    Will publishers dig in their heels and start an arms race or surrender? I think the main problem here is that if advertisers are making the ads, but also aren’t concerned about reaching ad blocking users, how does the industry realistically expect ads to get better? It seems clear that publishers will have to find another path, the question is which one.