Rise of ad-blocking software threatens online revenue

  • The New York Times
  • Updated: Jun 01, 2016 06:16 IST

NEW YORK: Many of the world’s largest Internet companies, like Google and Facebook, rely heavily on advertising to finance their online empires.

But that business model is increasingly threatened by ad-blocking software. One in five smartphone users, or almost 420 million people worldwide, block advertising when browsing the web on cellphones.

That represents a 90% annual increase, according to a new report from PageFair, a start-up that helps to recoup some of this lost advertising revenue, and Priori Data, a company that tracks smartphone applications.

Already, 36% of smartphone users in the Asia-Pacific region have so-called ad-blocking browsers on their mobile devices. In India and Indonesia — two of the world’s fastest-growing Internet markets — that figure is almost two-thirds of smartphone users.

The use of ad-blocking software has divided the online world. Supporters say it allows people to get better access to content without having to suffer abrasive ads.

Opponents, particularly companies that rely on advertising, say blocking ads violates the implicit contract that people agree to when viewing online material, much of which is paid for by ads.

“We found the results surprising because in the West we don’t often consider what’s going on in developing countries,” said Sean Blanchfield, chief executive of PageFair. “It’s only a matter of time until mobile ad blocking comes to the West.”

Patrick Kane, chief executive of Priori Data, said greater use of the software in emerging markets was driven by attempts to minimise spending on mobile data. Ad blockers help conserve data and make websites load faster by not downloading ads on the smartphones

While mobile ad blocking is mostly an emerging market phenomenon now, it is costing the global advertising industry billions of dollars a year in lost revenue. Roughly 200 million people also have ad-blocking software on their desktop computers, PageFair estimates.

Still, only 4.3 million Americans, or 2.2% of smartphone owners, used ad blockers — through browsers or other services — on their smartphones as of March. By comparison, 159 million people in China have installed ad-blocking software on their cellphones, the report said.

But as people in Western markets increasingly rely on smartphones to reach the Internet, the use of mobile ad blocking is expected to rise.

Analysts say such efforts may breach so-called net neutrality rules, which require all online data, including intrusive ads, to be treated equally.

Despite this legal uncertainty, people’s interest in blocking ads, particularly on their cellphones, is unlikely to wane.

“It’s already used by hundreds of millions of people,” Mr. Blanchfield, of PageFair, said. “You can’t put the cat back in the bag.”

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