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Does digital advertising still work?

May 23, 2019 7:30:00 AM

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The ad industry gets a lot of flak.

Inundated with ads, users readily adopted adblockers to improve their UX on the web. There were 615 million devices that were blocking ads in 2017. It’s easy to assume that internet users have developed a resistance to advertising. An opinion piece in The Guardian pointed out that we’d like to think “the billions of dollars, all the creativity poured into making [us] want certain things, it just doesn’t work on [us],” and so we’re quick to dismiss ads.

Yet, advertising works even when we think it has no hold over us. In a 2011 article for The Atlantic, Nigel Hollis recounted a comment that a guest made at a dinner party he was invited to; “I am not influenced by advertising," she said. Then she went on “to describe an erectile dysfunction ad with impressive detail”.

We’re nowhere near the decline of the ad industry. For as long as marketers are investing in advertising (US advertisers spent $107.5 billion on digital ads alone in 2018), we’re going to continue to see ads. This comes with a caveat: ads should not disrupt the user’s usual content browsing experience.

To that point, let’s examine how users’ attitudes toward digital advertising have changed and the implications for the publishing industry.

 

Ads are more annoying but not hateful

Kantar Millward Brown estimated that 69% of respondents surveyed found ads to be more intrusive in 2017 than it was three years prior. Notably, these respondents indicate that they are seeing more ads across the web. Focus on short-term ad revenue led publishers to sacrifice user experience and users have expressed their displeasure by installing adblockers, taking a bite out of publishers’ advertising revenue.

Perhaps surprisingly, most internet users do not hate ads! Younger consumers are paying more attention to online ads which is interesting given that they make up the largest percentage of adblock users. Similarly, 80% of UK internet users surveyed recognize that ads power the free internet.

 

Subscription models are a tough nut to crack

Acknowledging the fragility of the ad-sponsored model that underpins the open parts of the internet, the industry has turned towards subscription and membership models. However, the success of these models is conditioned upon the publisher creating content that readers find indispensable. Publishers looking to reproduce The New York Times's successful subscription business might be sorely disappointed especially when trying to sell to millennial readers, who have grown up consuming content for free. As New York Magazine wrote, “Advertising-backed publishing isn’t dead by any means, and even strong subscription businesses like the Times are unlikely to ever stop selling digital advertising.”

 

More are filtering ads instead of blocking them

According to a report from the Association for Online Publishers (AOP), adblock rates have stabilized since their peak in 2016, in part due to more people filtering ads as opposed to blocking them.

One such ad filter is Google’s Better Ads Standards. Scheduled to roll out across the world in July, it’s the tech giant’s attempt to “build a better world wide web”. When implemented, ads that fail to hit the mark Google’s Coalition for Better Ads (CBA) establishes will be blocked on the Chrome browser by Google.

As pointed out by CNBC, the initiative may have something more to do with Google’s bottom line than an altruistic move. “The idea behind this move is pretty straightforward: If users don’t have to deal with intrusive ad experiences, they may be less likely to download third-party ad blockers.” Their motives aside, with Google driving home the ad experience message, publishers that are non-compliant will get penalized.

 

Adblock users are monetizable

As you might expect, the revenue loss due to adblocking problem is a pesky one. In the report, AOP also mentioned that the estimated revenue loss across its 11 members increased to nearly £18.4 million ($23.9 million) in 2018, compared to £10.9 million ($14.2 million) in 2016.

Given most publishers rely on ad dollars to fund their team, they would be encouraged to know that most users (adblock users included) are fine with seeing ads as long as they are not interruptive.

Especially when the technology exists to monetize adblock users while providing them an acceptable ad experience, publishers who dismiss this group of users as “unaddressable”, are missing out on an opportunity to recover upwards of £950,000 ($1.2 million)1 in adblocked revenue.

 

What’s next?

Publishers can’t afford to rest on their laurels. Consumers are responding to all the noise and over-inundation -- this is why policies like GDPR and the California Consumer Privacy Act are a reality. If the industry doesn’t self-police, regulators will -- and with a much more blunt hammer that causes more collateral damage in the ecosystem than if the industry had behaved responsibly from the outset.

If publishers want to continue to monetize (adblock and non-adblock users) via ads, they will have to commit to providing a respectful ad experience. In particular, ad-supported publishers could consider collaborating with adblock recovery companies that are partners of the Acceptable Ads initiative -- a set of ad standards that promote a fast, light user experience. By doing so, publishers can monetize their adblock users while giving these users greater control of their online experience where they can easily opt-out if they truly do not want to see any ads.

 

1The audit among AOP’s 11 members found that nearly £950,000 ($1.2 million) in revenue was lost due to adblocking. This is an estimate. The exact amount of adblock revenue you can recover depends on your desktop and mobile adblock rates, eCPM, the number of ads per page, etc.

Alicia Chin

Written by Alicia Chin