Insight Constellations, Part Five

Blockchains and Blocking Ads

As the CCS Insight Predictions for 2016 and Beyond event approaches, we’ve been looking back at some recurring themes from Daily Insights in the past year or so. Here’s the fifth part of a list that highlights some notable trends.

We revisit two developments that have the potential to alter existing business models for companies along the telecommunications value chain. One’s an enabler, the other a disabler.

Blockchain: the end of the middleman?

Feverish hype. Blockchain isn’t quite there yet, but soon will be.

The blockchain architecture supporting distributed ledgers has reached a level of excitement that’s spreading across industries. The term is still fuzzy, and many have never heard it, but we expect this will change during 2016. Blockchain talk will heat up, and all sorts of companies will begin gathering talent in preparation for unknown disruptions.

Blockchain technology is the key enabler behind the virtual currency bitcoin. It’s a decentralised and secure method of maintaining records. This ability to create safe peer-to-peer accounts has powerful implications for financial institutions, but it would be short-sighted to ignore the potential of longer-term disruptions across the digital economy. From wireless subscriber accounts to on-demand car services, blockchain-based ledgers could alter customer relationships.

Earlier in 2015, we wrote that Nasdaq in the US was implementing blockchain technologies for one of its smaller, less-accessible exchanges (see Daily Insight: On the Block). It’s essentially a trial for wider use, and is being watched by other financial institutions across the globe. More recently, we noted a partnership between nine of the world’s largest banks to create common blockchain standards (see Daily Insight: Big Banks Back Blockchain). It’s a way for the banks to be involved in early development and to circumvent their exclusion.

There’s a huge level of trust required with blockchain accounts, and there’s certainly an angle of anarchy to the concept of distributed marketplaces. But the insecurity is fading as the technology grows beyond its roots and earns credibility. Blockchain is becoming an infrastructure brand. Yesterday, Microsoft announced a blockchain platform for customers of the company’s cloud-based Azure platform. The service is intended to support banks and insurance companies looking to try blockchain technology.

Blocking ads: the end of free?

We’ve highlighted ad blockers several times in 2015, with the use of browser extensions to block display advertisements having grown quickly on laptops and desktops. Statistics from some countries show that about 40 percent of younger computer users implement ad-blocking software. Research firm PageFair said that the number of people using ad blockers increased by 41 percent in 2015. It’s a major concern for content owners that have moved away from subscription models and rely on ads for revenue (see Daily Insight: The Ad-Block Arms Race).

Until recently, mobile platforms were somewhat immune to the ad-blocking trend thanks to the software-vetting process used by Apple and Google, which hadn’t allowed such apps. This created a safety zone for ad-supported sites given the growing amount of time users spend surfing with smartphones and tablets. But CCS Insight expected that ad-blocking software would eventually make its way to mobile platforms as well, further disrupting the browsing business model established over the past 20 years.

This happened in mid-2015, when Apple allowed ad blockers to be listed on the iOS app store (see Daily Insight: Ad Blocking Is Coming to Mobile Safari). Ad-blocking apps quickly became the most popular paid apps in the store.

The numbers are still small. The Interactive Advertising Bureau believes about 4 percent of smartphone users are currently using ad-blocking apps. But the vast majority of these are iOS users who have installed the software only in the past few months. The trend is clear and concerning for content owners.

CCS Insight expects that ad blocking will become a key topic in 2016, driving the need for business model changes and new partnerships as well as an arms race between users, sites and software developers. But this is now moving beyond apps and extensions. Several mobile service providers are exploring the use of network-level ad-blocking software that prevents advertisements from even getting through the operator’s network. At least one operator, Bermuda-based Digicel, is already doing this according to a recent article in The Wall Street Journal.

Last week, Facebook indicated its concern in a regulatory filing with the US Securities and Exchange Commission. Facebook stated that its future results could be adversely affected by software “that can block the display of our ads”. It said that “if such technologies continue to proliferate, in particular with respect to mobile platforms, our future financial results may be harmed”. The technology is indeed growing to mobile.

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