Ad blockers: A solution or a problem?

It's a cause. It's a curse. It's just business. Ad blockers take a bite out of the $20 billion digital advertising pie.

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Is it ethical for users to run ad blockers? We asked Irina Raicu, director of Programs in Internet Ethics at the Markkula Center for Applied Ethics at Santa Clara University, to sort out the issues.

All parties share some of the blame for the current state of affairs, she says. First, publishers err in telling users that their content is free. While vendors don't have an obligation to provide content without cost, they do have an obligation to be truthful and transparent about the bargain, which may include paying for that content by viewing ads and/or having their online activities tracked by the publisher as well as third parties. "Most consumers don't understand that they're paying with more than just their attention and time, and that bargain needs to be clarified," she explains.

Raicu sympathizes with people who have responded to intrusive ads by installing ad blockers, but feels that ad blockers are a blunt instrument. "There is no nuance now, either to the bargain that's offered by the advertisers or to the response with ad blockers," she says. "Both are all or nothing."

Some consumers have tried to strike a middle ground. For example, they use whitelists to view some ads, or use an ad blocker like Ghostery that lets users explicitly decide which types of ads are objectionable and should be blocked. In addition, users who dislike the distraction of Flash-based advertising can install browser add-ons that just block Flash content, such as Flashblock for Firefox and Chrome.

And some publishers have tried to offer alternatives, such as freemium and subscription services. However, they complain that most users haven't responded. In that case, says Raicu, "The use of ad blockers on those sites is unfair."

The bottom line for consumers is actually very simple. "If you don't want to view ads you need to pay," Raicu says. One way or the other.

In fact, he doubts that most publishers can afford to take "such extreme measures" as abiding by the conditions of Adblock Plus' program, especially when the digital advertising market has been moving toward high production quality ads with rich text and digital video.

And signing a deal with Adblock Plus won't make the problem go away entirely. The Acceptable Ads program has been controversial within the Adblock open-source community as well.

Some people took issue with the concept of opting Adblock Plus users into the whitelist by default, says Schumacher. The controversy split the community after the program was announced in December 2011 and led to the development of Adblock Edge, a version of Adblock that does not support acceptable ads -- or even offer an option for users to opt into such a program.

Other ad-blocker strategies

There are other ad blockers out there that don't monetize using this type of approach.

Some offer pay-what-you-want and/or "freemium" services. For example, the similarly named AdBlock, a competitor to Adblock Plus operated by former Google engineer Michael Gundlach, accepts donations and has no external investors.

Another service called Disconnect offers an add-on by the same name whose primary objective is to block tracking scripts -- but in so doing, it also blocks website ads relayed from third-party advertising networks. Disconnect's co-CEO Casey Oppenheim says his pay-what-you-want business model has taken off, with 3% of users contributing and 20% of new paying users choosing to subscribe annually. (There's also the chance that Disconnect will offer premium for-pay features in the future.) "Online privacy is a mass-market opportunity for the first time," he says. Which may explain why the company has drawn more than $4 million from venture capitalists.

(Faida at Adblock Plus declined to say how much money its investors have put up, but Schumacher, the biggest investor, says it's less than what Disconnect has raised so far.)

Ghostery, owned by marketing firm Evidon, doesn't block ads by default, but lets users block ads selectively after presenting information about the ads and companies behind them. Evidon's "data donation" business model asks users to opt into its GhostRank panel, which allows Evidon to collect "anonymous statistical data" on user activity that it uses to sell services to advertisers, publishers and others.

Countermeasures

There is no historical model publishers can look to in dealing with these issues, says Harold Furchtgott-Roth, a former FCC commissioner who is now a senior fellow and director at the Center for the Economics of the Internet at the Hudson Institute. "In the traditional media markets, the publishers deal with a finite number of content providers. On the Internet you have essentially an infinite number of places to go," he says. If publishers push users with ad blockers too hard, those users -- and their friends -- will just go somewhere else. And with so many choices, he says, users don't care if a publisher goes out of business.

That said, there are in fact companies that say they can help publishers with ad blocking issues.

For example, PageFair offers a free JavaScript program that, when inserted into a Web page, monitors ad blocking activity. CEO Sean Blanchfield says he developed the monitoring tool after he noticed a problem on his own multiplayer gaming site. PageFair collects statistics on ad blocking activity, identifies which users are blocking ads and can display an appeal to users to add the publisher's website to their ad-blocking tool's personal whitelist. But Blanchfield acknowledges that the user appeal approach hasn't been very effective.

ClarityRay takes a more active role. Like PageFair, it provides a tool that lets publishers monitor blocking activity to show them that they have a problem -- and then sells them a remedy. ClarityRay offers a service that CEO Ido Yablonka says fools ad blockers into allowing ads through. "Ad blockers try to make a distinction between content elements and advertorial elements. We make that distinction impossible," he says.

His customers declined to be identified on the record, but sites given to Computerworld to try did continue to display ads with AdBlock or Adblock Plus running, and a former executive at one publisher -- the Alexa top 100 firm -- says the business has used the service to recapture about $2.5 million in blocked ad impressions annually.

But that doesn't work for all publishers. Destructoid.com's Gonzalez isn't comfortable using a service such as ClarityRay that's designed to defeat ad blocking. "Fighting the people who want to block us is a quick way to lose those readers," he says. "So a product like ClarityRay, for us, would be a last resort."

As one would expect, Yablonka is a vocal advocate for the publishers who are his potential customers. "Content owners should have final control over the page," he says. But while he sees his service as helping recapture revenues, he acknowledges that his business model, which takes a cut of recaptured ad revenues, benefits from the "malfeasance" of ad blockers. So, he says, ClarityRay is moving away from fixed CPM (cost per impression) model "so we don't have a vested interest in seeing the problem become bigger."

Going forward, he says, ClarityRay will charge a percentage of CPM cost over the publisher's entire ad inventory, rather than taking a cut of the value of recovered ad impressions.

Watching the consumer

Alan Chapell, president of consumer privacy law firm Chapell & Associates, says the rise of ad blockers has created a tug-of-war between publishers and ad blocking product developers, with users in the middle. "There's confusion around who owns the user," he says.

With publishers so far unable to successfully implement paywalls or other alternative revenue strategies at scale, growth in the use of ad blockers poses an existential threat to the economics of the Internet, says Furchgott-Roth. "If the ad blocking groups prevail, it will substantially erode the business model for providing online content for free. You'll see a lot of websites disappear." But, he adds, "Other business models will take their place."

Everything turns on what consumers do next.

Existing users of ad blocking software may be a lost cause. Once consumers decide to block ads and experience the cleaner Web pages and faster load times that ad blocking delivers as it filters out bandwidth-hungry animations, video and other advertising content, they're less likely to want to give it up.

But will mainstream consumers in the U.S. turn to ad blockers in a big way? "The numbers have not reached the point where publishers are panicked," says Chapell. "But if those products were on 80% of computers, we'd be having a very different conversation."

Schmacher says adoption rates in Europe could be a harbinger of what's ahead for the U.S. In Germany, for example, about 15% of users run ad blockers -- three times the rate in U.S. But Europe is also very different from the U.S. in two key respects, he says: Europeans are more vigilant when it comes to privacy and ad tracking issues, and as part of its antitrust case against Microsoft, EU regulators insisted that consumers be given a choice of browsers on computers they purchased. Many chose Firefox, he says, where ad blocker add-ons have made the biggest gains.

With billions in ad revenue at stake, there's a big incentive for advertisers and publishers to figure out a way to preserve the current business model. And in the arena of countermeasures, ClarityRay's approach may be just the first volley. While Schumacher admits that the "URL-swapping" mechanism used by ClarityRay works, he says Adblock can easily make modifications to defeat it if more sites start using that service. But, he admits, ClarifyRay and others will probably move on to other methods to fool ad blockers, and that could be the start of an arms race between the big publishers and ad blockers.

Furchgott-Roth thinks that's a battle that the ad blockers would have a hard time winning. "The economic model between sites and advertisers is so powerful that they will figure out some way to allow this to continue." And it won't be just the small startups like ClarityRay and PageFair, each with about $500,000 in backing, that the ad blocking vendors will need to worry about. Ultimately, he says, "Google has more money to invest in this than do the ad blocking companies."

For some smaller publishers catering to more tech-savvy audiences, dealing with the effects of ad blocking is fast becoming a matter of survival. Since appeals to users haven't worked at Geekzone, Freitas is trying to deal with the declining ad revenue problem by coming up with other ways to generate income. For example, he has developed a sponsored tech blog where community members receive early releases of new mobile phones in exchange for writing about their experiences in a blog. "They can write anything they want, and Telecom New Zealand pays for that," he says.

With display ad revenues declining and paid contributions a tiny fraction of revenues, such models are the key to recovery. "The big takeaway for publishers is that you have to have a diversified income stream to survive," he says.

This article, Ad blockers: A solution or a problem?, was originally published at Computerworld.com.

Robert L. Mitchell is a national correspondent for Computerworld. Follow him on Twitter at twitter.com/rmitch, or e-mail him at rmitchell@computerworld.com.

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