Media Industry’s Murky Ad Free Future

Much has changed since the dotcom bubble, but advertising still remains the bread and butter of the internet.

Free content sites rely almost exclusively on advertising and even the most established media sites rely mainly on ads to pay the bills. For media sites, paid subscription revenue is relatively insignificant compared to advertising. A recent Reuters study found that on average only 11% of users sign up for subscriptions. Thus, the business of selling eye balls drives the majority of free sites and services such as Facebook and Google.

Unlike print ads however online ads aren’t static. They pop up, blink, follow and generally irritate users by getting between them and the content they are browsing. Ad blocking software that removes or filters ads on web page, now allows users to fight back. When a user is browsing without an ad blocker, the site connects to an ad server to display ads at various spots on the page. These ad servers are typically part of an ad network that promises advertisers a set number of views or impressions per day. Ad blockers work by putting a wall between the browser and the ad sever thereby preventing ads from loading.

Ad-free browsing results in faster loading times and less resource consumption as CPU and data usage is reduced. Saving data which is relatively expensive in most countries while dodging irritating ads provides a strong incentive for users to get on the bandwagon. Having originated from online gaming circles – as irritated gamers looked for ways to stop ads interrupting their games – the phenomenon has spread worldwide. Globally almost 200 million users use ad blocking software and the number is rising rapidly.

The rise of ad blocking is forcing online publishers to get their thinking hats on. The days of easy money are over. Sensationalist ‘click bait’ headlines to increase traffic is meaningless, if these users cannot be shown ads, racking up impressions that translate into revenue

Naturally this is a worrying trend for the global media industry heavily reliant on an advertising centric revenue model. Up until now, publishers were banking on the growth of mobile, where ad blocking plugins either don’t work or are cumbersome to install. At its recent developer conference Apple unveiled its new operating system, which supports ad blocking. Given its product leadership and dominance in the mobile market, Apple’s getting behind the ad blocking movement has dire implications for publishers. Wired magazine headlined the story “Apple’s support of ad blocking may upend how the Web works”.

The rise of ad blocking is forcing online publishers to get their thinking hats on. The days of easy money are over. Sensationalist ‘click bait’ headlines to increase traffic is meaningless, if these users cannot be shown ads, racking up impressions that translate into revenue. More traffic requires more servers and hence more cost. Thus, this equation quickly loses its lustre if the majority of users install ad blockers.

Paid subscriptions are the next most direct form of revenue, but only a fraction of users are generally willing to pay for content. What’s more, paywalls are inefficient and can be circumvented easily. For example Googling the headline of an article allows users to access it even if the number of articles available for free for the week or month have been exhausted. Private browsing modes such as Google’s Incognito mode also achieves the same result as it prevents the site from keeping track of the number of articles read.

Other mainstream revenue models for online publishers are affiliate programmes and donations. Affiliate programmes refers to mechanisms through which websites get rewarded for driving potential customers to a business. For example a food review site may display the phone number or the location of a restaurant next to its review in return for affiliate revenue. Online affiliate programmes are more popular and usually reward websites for funneling traffic to other websites and apps.

Securing affiliate or donation revenue requires a highly engaged audience interested in a niche topic. This is the exact opposite of the current spray and pray strategy with rewards placed on attracting the most number of users possible. One can only hope that this enforced discipline serves as a timely wakeup call to digital media and forces publishers to raise the bar in terms of content. Building a loyal, highly engaged group of core users opens up multiple revenue streams from donations and affiliations to product placement and partnerships. But even for the most established publishers, this is a distant goal and the transformation is likely to be painful. Ad blockers, while providing a blissful browsing experience, may be putting your favourite website out of business.