Ad Block Software & the Cost to Online Retailers

By — 09.23.15

Tablet Shopper

The use of ad block software is not a new problem for online advertisers, but the issue has recently taken center stage as usage has become more widespread. Apple’s new iOS system that was just released is also adding fuel to the fiery topic by making ad blockers much more accessible via a quick download from their app store. The iOS 9 update will make it possible to block ads seen on Apple’s Safari browser, which accounts for a reported 52% share of all mobile web browsing. With the shift in traffic to mobile top of mind for online advertisers, this threat from Apple’s newest operating system is expected to impact mobile activity most severely.

Who uses ad blocking software?

Recent statistics from Adobe suggest around 16% of US internet users are currently using ad blockers, which grew at a rate of almost 50% over the past year. Interestingly enough, the main driver of ad block growth has been Google’s own Chrome browser. Chrome rolled out ad block browser extensions to the masses, which were easy to install. This group, totaling around 45 million average monthly active users in Q2 this year, tends to skew younger and male with certain verticals being hit hardest by the ad blockers. Gaming, news, tech, and social media websites top the list with as high as 26% of visitors blocking ads for gaming, while search engines and shopping sites are at the bottom of the list with around 7-10%. The breakdown by device for ad blocking software is still heavily skewed towards PC at 41% vs only 11% of mobile users according to estimates from June this year.

Ad-Block-Chart

The major concern for online advertisers is significant revenue loss. This trend isn’t slowing down, and is set to build at an exponential rate. Research estimates it will cost advertisers upward of $10B in blocked ad revenue in 2015 in the United States alone. This is almost double what was seen in 2014, and the number is expected to double again to an estimated $20.3B in 2016. Even with these increasing growth rates, recent studies have found that approximately 90% of ad agency professionals indicated that they did not feel ad blocking software was a “major concern.” Of those, 46% considered it somewhat a concern while 45% did not see it as a concern at all.

So why aren’t advertisers concerned yet?

This is largely due to the fact that the trend isn’t affecting ads or publishing profits yet. Despite the large growth rates, the usage of this software is still low when compared to the larger eco-system of potential ad viewers. In addition, as mentioned above, the industries with the highest ad blocking adoption rates, such as gaming, tend to have very tech savvy users in general. Most retail advertising will fall into the more general shopping category where adoption rates are low. Most importantly, not all ads are blocked by this software. There are a number of “non-intrusive” ads, such as Google search ads, which are allowed by default and account for the majority of online ad revenue, at 38% in 2014. Ad blocking software primarily affects display and retargeting ad types.

What drives ad blocking adoption and how can we minimize the effects as advertisers?

When a group of non-ad blockers were surveyed, they stated the main drivers to cause them to start using ad-blocking software would be if their personal information is misused, or if there is an increase in the number of ads they’re seeing. Coupled with research that suggests blocked ads are typically display, video, and social ads, all of which stray from the more seamless style of native advertising, it’s clear that people are looking for a better online experience. As advertisers, we need to understand our impact here and commit to responsible and personalized advertising that doesn’t violate a user’s privacy. Advertising that is targeted to the right person, at the right time and place, and with the right message should be mutually beneficial for both user and advertiser. Non-intrusive, personalized advertising is actually welcome by the majority.

Another aspect that many consumers don’t think about is that advertising takes on the expense for the sites we use fee-free every day. The alternative to advertising is fee-based subscriptions to sites such as what YouTube launched this year. Media advertisers are jumping on this bandwagon. So, unless users are willing to pay a fee for the sites they use on a daily basis, the ideal solution is to find that balance point between users and advertisers.

The best way forward

Creating advertising that is non-disruptive and beneficial to the consumer has been a long-standing belief at Adlucent, and is reflected in the best practices we implement to manage our client’s campaigns. Google’s Quality Score is an excellent metric to use as a driver to improve ads and reward relevancy for advertisers. It’s our belief that if all networks adopted the idea of a Quality Score and utilized a similar strategy, this would highly encourage all advertisers to improve relevancy for their ads. Click-through rates for certain techniques have decreased over time, so publishers simply end up placing more ads to gain clicks, which ultimately results in a worse consumer experience. We believe the way to a balanced experience is to have fewer, but higher quality ads.

We consider responsible advertising to be a core focus of our company’s mission. The onus is on advertisers to make advertising as relevant as possible. As 14+ year veterans in the industry, we have theorized, tested, and proven that the right combination of personalized messaging and optimal timing, to a targeted user, can be highly successful for all parties.


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