The Ad-Block Arms Race

How Disruptive Will These Add-Ons Get?

Adblock_Plus_lIs it parasitic behaviour or perfect free-market dynamics? It doesn’t take much for users to disrupt a billion-dollar industry.

According to a study by a firm called PageFair, 41% of Internet users between the ages of 18 and 29 block Web advertisements in their PC browsers. Preventing ads can be accomplished by installing simple and free browser add-ons like Adblock Plus, which is now the most popular third-party extension for Firefox. The study states that the number of people using Adblock Plus has increased from 20 million to 144 million in the past five years, and there are other ad-prevention apps for most popular browsers. Usage of such software is up by 70% year-on-year.

The stats get more disturbing for publishers: the most active Web users are most likely to block ads. Gaming and technology sites are among the hardest affected by the behaviour. A small download can mean big changes for a number of global industries.

It’s the elephant in the room for content providers already struggling with a shift from physical media and failed paywalls. The objectivity of some of PageFair’s statistics can be debated, but the accelerating threat of ad-blocking software is certainly causing another iteration of concern among publishers and online services. Companies are rushing to find new methods of ad placement or completely new ways to make money from content.

The implications are so vast and change is happening so quickly that some affected parties are contemplating suing the makers of popular ad-blocking software for threatening current business models. In France, a trade group for online publishers, GESTE, and the French Internet Advertising Bureau are exploring the possibility of suing Eyeo, the German company behind Adblock Plus.

The French organisations may have taken inspiration from a current lawsuit in Germany in which several local media companies are suing Eyeo. Its business model is under fire — it charges whitelisting fees from advertisers in addition to collecting end-user contributions, a controversial move for the controversial browser add-ons. Adblock Plus can circumvent Adblock Plus for a price, though users can still opt out. Eyeo states on its Web site that the company is “just getting started”. That’s not a reassuring statement for affected industries.

When publishers and service providers do find ways around ad-blocking utilities, those apps turn around and offer updates: it’s a banner-blocking arms race. However, the bigger concern is demographics, with tech-savvy generations making their own decisions. The pernicious Web-surfing habits of youth today will be the norm of the adults of tomorrow. Publishers and advertisers must find ways to use tracking and targeted ad placement in more subtle but effective ways.

Ad-blocking is a marginal threat to the more tightly controlled mobile ecosystems. Most mobile apps are installed via Apple’s and Google’s controlled app stores, and those companies are blocking the blockers despite the existence of technical work-arounds. Mobility is providing some immunity to ad-blockers, an encouraging development for companies relying on ad-based business models. Advertisements are becoming more targeted and more contextual as the use of smartphones and tablets increases.

Countering disruptions to revenue models with lawsuits is rarely a successful approach. Users tend to grow with their behaviours even if litigation succeeds. Company executives might stay the same, but generations trend in their own ways. Past lawsuits by content owners did little to prevent the use of VCRs, digital video recorders or MP3 players. Ad blocking has reached mainstream and business models need to acknowledge the trend.