The Marketer’s Guide to Ad Blocking

THE OVERVIEW

In 2015, ad blocking resulted in an estimated $21.8 billion in “blocked”

revenue . The revenue that is “blocked” is twofold: the dollars that would have

accrued to brands from consumers going from ad-click to purchase, and the revenue to publishers from CPC (cost-per-click) and CPM (ad impressions).

Between the media buys and the creative production costs that go into never-

to-be-seen ads, ad blocking is expected to cost the industry $41.4 billion

globally, this year alone. The onus is on both publishers and advertisers to

unlock greater value for consumers in their respective domains: for

publishers, in the kinds of ads they serve consumers and overall website user

experience, and for advertisers, in the creative they produce to begin with.

Ad blocking is costing brands and publishers potential revenue…

Global Economic Cost of Blocking Ads

The global cost of ad blocking will almost double this year

PageFair and Adobe | 2015 Ad Blocking Report

Billi

on U

SD

0

10

20

30

40

50

2013 2014 2015 2016

90%Increase in ad blocking cost from 2015-16

…but for publishers, ad revenue is still on the rise.

In spite of all the threatening rhetoric around ad blocking, publishers like Slate

and Huffington Post don’t see ad blocking as a significant threat to their

business.

For the New York Times, the share of digital revenue from advertising has

continued to increase. Ad revenue remains high as digital subscriptions grow,

pointing to the success of a dual revenue model: it doesn’t have to be either ads

or subscriptions that drive revenue, but a healthy mix of both. And

subscriptions don’t have to suffer as a result of ads, either. But that hasn’t

stopped published from finding new revenue streams in the the new world of branded content. Many are now offering their research and writing

capabilities as creative resources to brands. These figures reinforce the

general sentiment of publishers’ around ad blocking: they don’t see ad blocking

hurting their business as badly as it’s being made out to seem.

New York Times Digital Revenue (Global)

Ad revenue is still growing — along with subscribers

Source: The New York Times

Millions

$20

$40

$60

$80

$100

$120

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14

Subscriptions

Advertising

Source: Sourcepoint

THE PUBLISHER'S RESPONSE: CONTENT BLOCKING AND SUBSCRIPTION MODELS

For the majority of online publishers, ad revenue funds journalistic content.

Entirely free content is an unsustainable business model. To discourage

readers from blocking their ads, publishers have deployed workarounds

ranging from the costly (subscription models) to the aggressive (content blocking, wherein readers can’t access articles unless their ad blocker is

disabled) to the more creative (branded or sponsored content written by

marketers on behalf of brands). Huffington Post is cutting down on ads and

increasing its sponsored content, signaling the increasing openness of

traditional journalism outlets to branded content. Brands are building out in-

house editorial functions to combat ad blocking with branded content, and

there’s a strong business case for doing so.

Publishers’ preferred response to ad blocking

Content blocking Subscription models Paywalls Using an ad block vendor

X25%

22%

47%

22%

9%

Why consumers tried using ad blockers (Percentage of respondents)

Examining the trigger: it’s not poor quality ads

Found out ad blockers exist

Got a virus from clicking on an ad

Got tired of low quality ads

A friend recommended an ad blocker

Don't like seeing behavioral targeted ads

0 4 8 11 15 19 23 26 30

Source: IAB

AD BLOCKING ON MOBILE

On mobile homepages, ads are more data-heavy than editorial content. Since

news sites are often media-rich in an effort to stand out, the load times for

these pages are undoubtedly already high. With ads in media-rich formats

like video added into the mix, pages take more time and mobile data to load.

The New York Times conducted tests to see how the load times and data

usage for the top 50 news websites’ homepages varied, finding that almost

half of the data on these pages comes from ads and the content that ad

blockers filter. Given this data, it’s no surprise that ad blockers are appealing

to consumers of mobile news. CNN’s homepage used 4.3 MB of mobile data to

load ads, compared to 2.7 MB to load editorial content. On a typical data plan, that amounts to $0.09 a page to load ads.

Ads on mobile browsers eat into data plans and increase page load times.

Over half of mobile data is spent on ads Se

cond

s to

load

0

3

6

9

12

15

18

21

24

27

30

The Daily Beast

Chicago Tribune

New York Post

Salon

CNN

Los Angeles Times

Vox

The Atlantic

Vice

The Huffington post

The New York Times

Buzzfeed

Seconds to load advertising content Seconds to load editorial content

Source: The New York Times, The Cost of Mobile Ads on 50 News Websites | October 2015

Websites with younger, tech-savvy audiences see more ad blocking.

AD BLOCKING BY DEMOGRAPHIC

Websites that cater to younger audiences – like gaming, social media, and

tech — see significantly more ad blocking by visitors. (Note that gaming and

tech sites will also be more data-heavy to begin with by virtue of the media

formats they host, making ads even less desirable to consumers craving

quick load times.) Within that subset, younger male audiences are more

likely to block ads. This trend will force brands to think harder about the types of ads they create for different audience segments, as well as refine

their targeting strategies to ensure they’re not bombarding the most

enthusiastic ad blockers during their social media sessions.

Global share of ad blocking rates by site category (Q2 2015)

Visitors to social networking sites are more likely to block ads

Source: PageFair and Adobe | 2015 Ad Blocking Report

0

6

12

18

24

30

Gaming

Socia

l Netw

orking

Tech/Internet

Education

Sports/Recreation

Finan

cial S

ervice

s

Restaurants/Dining/Food

Charita

ble O

rganiz

ation

s

Governm

ent/Legal

THE MARKETER’S RESPONSE

For marketers, it’s no longer simply about quality creative — ensuring an

overall quality user experience is paramount. Marketing teams are absorbing

design and engineering functions to ensure they keep user preferences top of

mind when designing online experiences for customers. Especially as ad

blocking finds its way to mobile browsers, there is an increased expectation

of a cleaner, less interruptive browsing experience on the smaller, more private screen.

User experience is becoming a bigger marketing priority.

User experience is a high priority for two-third of marketers

Source: Celtra

We don't think about itIt's somewhat importantIt's high priorityIt's our highest priority

X

22%

48%

26%

4%

SO WHAT’S NEXT?

Ad blocking isn’t the end of advertising as we know it — it’s a fork in the road that will determine which advertisers rise to

the creative challenge and diversify their messaging channels,

and which continue to try plowing through the ad blocking

battlefield. New media formats and the rise of native

advertising are two avenues that hold rich advertising

opportunities for brands. Whichever path advertisers choose,

one thing is clear: the consumer has taken the reins, and the

brands that succeed will be those that have a complex

understanding of consumer needs.

Percolate is The System of Record for Marketing. Our technology helps the world's largest and fastest-growing

brands at every step of the marketing process.

Want to learn more?

Contact learn@percolate.com for more information

or request a demo today at percolate.com/request-demo

Mihika Barua Mihika Barua is a content marketer and community

manager on the Integrated Marketing team at Percolate.