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Is it possible to jam ads and still preserve revenues?

14 August 2015

An ad-blocking revolution is underway. How can advertisers and Telcos protect their revenue streams without undermining the customer experience?

If you've read any of my previous blogs, you'll know that I live in a rural area where broadband response times are a constant source of woe. At times, my Internet connection is so slow I can faintly hear the sound of a dialup modem in my head (if you've forgotten or are too young to know what I mean, you can relive the excitement here).

Recently, though, my son advised me to install the Firefox extension AdBlock as a way to help speed things up. Success! I'm now ad-free. But with the sound of dialup modems fading, I've turned my thoughts to a subject that has never previously caught my attention.

Ad-blocking might not be the first thing that springs to mind as a fix for a slow internet connection. Digging deeper, however, it's staggering how much bandwidth we allow web ads to consume. Last month, the Guardian compared it to "pouring thick treacle into a mechanical clock", and cited Mozilla developer Stefan Arentz's observation that a single page of the Verge contained 8KB of actual content, but over 6MB of ads. This is a ratio of 16 to 12,000!

Web ads are degrading to the browsing experience for reasons other than simple intrusiveness. This is particularly true on mobile, where we pay by the megabyte for our data. Ads aren't just slowing us down - they're costing us money, too.

The growing influence of the ad-blocker

As it turns out, I'm not the only person in the world to block ads with software. In fact, there are almost 200 million of us, according to figures from PageFair and Adobe. This number has grown 41 per cent in the past 12 months alone, making the phenomenon a real threat to advertisers' revenues.

The market has started to act. Back in February, some of the world's biggest advertising platforms - among them Google, Amazon and Microsoft -paid Adblock Plus, one of the most popular free ad-blocking extensions, to whitelist their ads. This gives the impression that ad-blocking is as much an extortion racket for the industry as a way to protect consumers.

Other developments have given it a greater air of legitimacy, particularly on the mobile front. Just this week, the launch of IoS 9 saw Apple permit ad-blocking in Safari. And Deutsche Telekom executive Tomasz Gerszberg reportedly wrote on LinkedIn last month that advertisers should be made to pay for the mobile bandwidth consumed by their product. This is a move that would protect customers not just from ads, but also from unsolicited spending on data.

Obviously, these companies have ulterior motives. With the launch of Apple News and the fourth generation Apple TV looming, the iPhone maker has good reason to funnel advertisers onto its own iAd platform.

Meanwhile, it's no surprise that a Telco should want a slice of the advertising pie as the revenues on voice and messaging services shrink. But is this really possible and practical?

Anticipating the rise of the zero-rated ad

The principle described by Gerszberg is basically the same thing as zero-rating, which isn't a particularly new idea. In many markets, operators have already struck up partnerships with OTT providers to carry their apps without charging the user for data. It wouldn't take rocket science to do the same with ads. It just needs the cooperation of the advertising industry.

Earlier this month, the balance shifted again when a start-up called Shine took out a full-page ad in the Financial Times. "Mobile ads consume 50 per cent of the data mobile subscribers pay for," it said. "Advertisers make billions in mobile advertising. Consumers should not have to subsidise their business."

This wasn't just a consumer advocacy campaign. Shine, which operates the website zeroratingads.org, is looking to market a new ad-blocking technology that Telcos can deploy in their own data centres. This would prevent ads from landing on customers' devices in the first place. Advertising platforms would be given the same choice as with AdBlock Plus: pay us to show your ads, or we'll block them from reaching your target audience.

This approach may well bear fruit. Shine claims to be in talks with a number of potential customers for the technology. Still, one can't help but wonder if there's a less obviously antagonistic way to zero-rate ads, and with less of a threat to net neutrality.

Perhaps the answer is for operators to help advertisers improve their product. Think about it. Few industries are as data-driven as advertising, and few companies hold as much data on their users as Telcos. What if operators could take money from customer and advertisers by offering both groups a genuinely valuable service?

Whatever happens, both ad-blocking and zero-rating exist, and will only continue to grow in popularity as ads become more bandwidth-intensive. The outcome could be a crippled advertising industry. But with the right mind-set from every stakeholder, it could also be one that's smarter, more efficient and fairer for the customer.

In the meantime, my own decision to block ads hasn't gone entirely unnoticed. The Guardian website is on to me: "We notice that you've got an ad-blocker switched on. Perhaps you'd like to support the Guardian another way?" I've not clicked that button.