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With ad-blocking software, readers have declared war on publishers

Carl Mortished

Nick Ray

We now have the perfect riposte to the tiresome dinner party guest who insists that she is never influenced by advertising. Good news for bumptious Mad Men but the bad news is that the big influence of web advertising is mainly to provoke consumers to switch it off.

Advertisers know that popup ads, banners and videos annoy web users, and for several years the technology to block irritating advertisements has been available. For media companies and Internet publishers who rely on advertising income, the emergence of browser applications that filter out advertisements was a worrying development.

The worriers now have reason to be alarmed. Use of ad blocking software is ubiquitous; according to the 2015 Reuters Digital News Survey, 47 per cent of American readers of news websites and 39 per cent of British readers are using ad blocking software. Of equal concern is the survey's confirmation that web advertising is a turnoff with about a third of readers saying they ignore ads and will avoid websites where advertising interferes with content.

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Web advertising revenues are falling and no one seems to have a solution that would keep readers happy while allowing advertisers and publishers to make a profit. According to Pagefair, a consultancy that advises publishers how to keep their advertising safe from ad blocking, Google lost more than $6-billion in revenues forgone from advertising blocked by Google Search users. Adblock Plus, one of the leading software providers, claims 300 million downloads of its app. Launched a decade ago as an open source project, the app can be tailored by users but its parent, Eyeo, also generates revenue from publishers who can whitelist their ads by complying with their minimum standard of acceptable ads. However, Adblock users can also tailor the app to exclude even the compliant, whitelisted advertising.

It looks like the media industry is on a collision course with … who, exactly? The only honest answer must be that the readers have declared war on the publishers, a conflict in which neither side can gain long-term advantage. In exasperation over the impact of ad blocking, British newspaper the Guardian has installed a message on its website that pops up when it detects ad blocking software, asking the reader to make a voluntary contribution. The Guardian's left-leaning commentary has, to its surprise and delight, secured a very large readership in North America and it has so far resisted a subscription-based funding model. However, it is difficult to see how it can survive in its present form if its international web audience insists that free must really mean free-for-all.

In Germany, desperate media companies have taken Eyeo to court, seeking protection from its alleged anticompetitive behaviour but two recent challenges, one by Handelsblatt and Die Zeit, another by broadcasters RTL and ProSiebenSat.1 Media AG both failed. A third of Germans are using ad blocking software and Meetrics, an Internet advertising consultancy reckons that it has cost publishers more than €800-million in ad revenue forgone.

The battle is not over because it is now switching to mobile phones where the leading software providers, Google and Apple control the operating systems and therefore can control ad blocking software. The latest bad news is that iOS 9, the latest version of Apple's mobile browser will allow you to download an ad blocking app. But the story does not end there because Apple is not just interested in making life easier for users, it is also very keen to get control of the content that you see on your iPhone. Apple is launching a News Format in the fall for iOS 9 and has already signed up several big media companies, including The New York Times, CNN and Bloomberg.

It's all about being compatible with the dominant platform or media infrastructure. The question that readers need to ask is to what extent they are prepared to narrow their choice of news or information supplier to those made available by the platform owner and if not, to what extent they are prepared to tolerate sponsored news. Faced with the decimation of their conventional advertising revenues, some newspapers, including The New York Times and the Guardian have begun to publish sponsored content where a commercial organization collaborates with journalists to produce copy which is then visibly branded with the organization's logo. The branding is visible but discreet and the stories look "independent", albeit produced in collaboration with the sponsor.

Many readers may be indifferent to the niceties of editorial independence and the threat from the octopus tentacle of technology companies. If you are reading this article, it is because you (or someone on your behalf) has paid a subscription. However, according to the Reuters digital survey, three-quarters of Britons and two-thirds of Americans would never pay to watch or read news.

The British are being disingenuous, however, because even those who steadfastly refuse the invitation to subscribe to websites are involuntarily paying for what is one of the most powerful and influential news services in the world, the BBC. It is funded by a compulsory licence, paid for by each household in Britain and the continuation of that poll tax is currently the subject of political controversy in the U.K. In Canada, the state broadcasting model is also threatened and it is fair to say that even if the BBC's licence-based funding continues, the world cannot rely on government-sponsored broadcasting to provide a balance to the encroachment of commercial sponsorship into news content.

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The simple answer may be that advertisers need to produce better advertising that people might enjoy watching. The Mad Men have done it before; they need to get creative.

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About the Author

Carl Mortished is a Canadian financial journalist and freelance consultant based in the U.K. With a career spanning investment banking, journalism and consulting for global companies, he was for many years a financial writer and columnist for The Times of London. More

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