Difference between revisions of "Ad Blocking and the State of Online Advertising"

Revision as of 18:20, 1 August 2016

As with just about any market driven economy, the online advertising marketplace is based on the concept of supply and demand. As web publishers, however, we sometimes subconsciously invert the supply and demand equation within the context of online advertising. It is all too easy to think of our websites as representing the demand side, requiring ads from our suppliers (in the form of Google AdSense, ad networks and direct advertisers). The reality, of course, is that the advertising space on our websites is actually the supply side (it is, after all, called “inventory” for a reason), with demand taking the form of advertisers looking for places to run their ads.

Many of the challenges facing advertising funded web publishers today are symptoms of a longstanding imbalance in this supply and demand equation. For quite some time now there has been an unhealthy imbalance between supply and demand, the effects of which have contributed to a backlash from internet users in the form of the increased deployment of ad blocking solutions.

As supply outstripped demand, CPM rates dropped. As web publishers made less money per ad impression many websites tried to compensate by displaying more ads per page. Another symptom of this imbalance is the inability of most ad networks to fill all the inventory on a website. This led to the widespread chaining of ad networks where a request to fill an ad space is passed through multiple ad networks until either an ad is available or the end of the chain is reached. Not only did this result in degraded website performance, but the further down the chain the request travelled, the lower the quality of the ad often became.

Further, the trillions of impressions of low CPM ads designed to build brand awareness that were never intended to be clicked have desensitized visitors to the more valuable CPC ads that were, leading to so-called “ad blindness”, declining click-through rates and additional pressure to compensate by running more ads per page.

As people began to see re-targeting advertisements for products they had researched on retail websites follow them around the internet, privacy in online advertising has become an additional area of concern (albeit one based on a misunderstanding of how ad retargeting works).

The reasons for the popularity of ad blocking aside, the facts are not in dispute. Websites that track usage generally report that between 20% – 30% of visitors are using an ad blocker. For websites that rely solely on advertising, the percentage of lost revenue typically falls into a similar percentage range.

The web publishing industry is far from doomed, however. As outlined in the remainder of this book, there are many strategies and technologies available for addressing the ad blocking issue. While some web publishers may fall by the wayside, the future will reward those publishers that continue to produce unique and quality content, take informed, intelligent and measured steps to address ad blocking and think beyond advertising as the only way to turn website traffic into revenue.

What’s the DEAL?

The digital advertising industry is represented by the Interactive Advertising Bureau (IAB). The IAB is comprised of members that include most of the major media, publishing and technology companies. A key responsibility of the IAB is defining the technical standards for online advertising. The various standard ad sizes in use today, for example, were originally defined by the IAB.

Unsurprisingly, the IAB has also taken a keen interest in the issue of ad blocking and has devised a recommended approach that is based on the acronym “DEAL”:

• Detect ad blocking, in order to initiate a conversation.
• Explain the value exchange that advertising enables.
• Ask for changed behavior in order to maintain an equitable exchange.
• Lift restrictions or Limit access in response to consumer choice.

This approach advocates a measured approach when addressing the issue of ad blocking. The key goals are focused on educating users about the importance of advertising in supporting web content and seeking a change in behavior by users of ad blocking technology. Only as a last step does the IAB suggest imposing restrictions on access for those users continuing to use ad blocking.

In suggesting this approach, the IAB appears to be attempting to avoid the escalating technology arms race between ad blocker developers and the advertising and publishing industry. It is better, the IAB contends, to give users a reason to willingly turn off ad blocking than to develop ways to defeat ad blocking technology (which will, in turn, result in the development of more advanced ad blocking solutions).

Making Advertising LEAN

With all the discussion surrounding ad blocking it is easy to lose sight of the fact that people use ad blocking because they feel that advertising has degraded the overall user experience of the internet. If the visitors to a website are viewed as customers, then the old adage that “the customer is always right” suggests that something has gone wrong with the way that online advertising has evolved over the years.

Many people believe that online advertising slows down web page loading, drains phone batteries, exhausts mobile data plans, is overly intrusive, delivers malware and invades their privacy. Some of these perceptions are, of course, based on misunderstandings about how the underlying technology works, but most concerns are valid.

In response to these concerns, the IAB has created a new set of advertising standards referenced by the “LEAN” acronym:

• Light. Limited file size with strict data call guidelines.
• Encrypted. Assure user security with https/SSL compliant ads.
• Ad Choices Support. All ads should support DAA’s consumer privacy programs.
• Non-invasive/Non-disruptive. Ads that supplement the user experience and don’t disrupt it.

The hope is that the standards for LEAN advertising will be both widely adopted and result in ads that are acceptable to internet users. The widespread deployment of LEAN advertising probably won’t be enough to make people uninstall their ad blocker, but it may just prevent others from installing one.

Summary

Online advertising, like any other marketplace, is based on supply and demand. A seemingly infinite supply of ad space has resulted in a decline in revenue for websites that rely on advertising income. As websites added more ads to compensate for declining revenue an unforeseen side effect was the rise in popularity of ad blockers. The IAB, an industry group representing advertisers and media companies recommends a specific approach to dealing with ad blocking, encapsulated by the DEAL acronym. The IAB is also creating new standards for online advertising that advocate lighter weight, secure and non-invasive ads.