Here's What Happens When Ad Blockers, Publishers and Agencies Get Together to Talk About You-Know-What

Lauren Johnson, Christopher Heine - - Adweek : Technology

A candid discussion on digital's hottest topic By Lauren Johnson , Christopher Heine October 25, 2015, 7:58 PM EDT Technology Adweek gathered representatives from publishers, agencies and ad blockers to discuss the key issues. Apple's recent flipping of the switch to allow for ad-blocking apps has sent the digital publishing world into a full-blown crisis, as the number of consumers fed up with ads that clutter and slow down websites—and doing something about it—has reached critical mass. While ad blocking has been around for years, it is now top of mind for marketers and publishers as ad blockers experience massive growth. The percentage of those using ad blockers in the U.S. reached 48 percent in the last year, according to a report commissioned by Adobe and conducted by PageFair , which estimates that ad blockers will cost publishers $22 billion this year. (UBS Securities puts the damage at $1 billion.) And with ad-blocking apps routinely among the most popular downloads for Apple's iPhone, what is a crisis could become a catastrophe. Some are quick to point the finger at the rise of sophisticated ad-targeting technology that produces intrusive ads like pop-ups and retargeted banners. "Unfortunately, we've all created a situation or allowed a situation where we're buying ads all over the place," says Steve Carbone, managing director and head of digital and analytics at Mediacom. And yet, despite all of the hand-wringing about how much financial damage ad blockers will ultimately cause, the topic has also opened up new conversations between publishers and consumers to figure out how to fix the problem. "We try to talk to them about the value exchange, and we try to ask them what type of ads they like and don't like," says Jed Hartman, chief revenue officer at The Washington Post. To get a closer look and a better understanding of a topic consuming the business of digital marketing, Adweek last week gathered a half-dozen representatives of publishers, agencies and makers of ad blockers to talk through the key issues. Adweek: Why has ad blocking become so popular? Jared Belsky, president, 360i: I think there have been three catalysts. First, the obvious one: Apple has taken a pretty hard-core stance that ad governance has been poor. They wanted to make some changes with the disruption of the iOS 9 browser. The second one is that more people are precious about what they're willing to receive on their device—as mobile penetration has gone up, you've hit that conflict. Lastly, consumers are smarter than ever, and many of them are aware that a big chunk of their data plan is being consumed by these ads. What's critical to understand [is that ad blocking] is not just about the percentage of people that have ad blockers but rather the percentage of quality ads that are blocked. Those are two very different things. Jed Hartman, chief revenue officer, The Washington Post: The advertising ecosystem has really gotten caught up in the capabilities—from an advertiser [and] publisher perspective—that technology has to offer. In some cases, it didn't flip this around and look at what it does to the customer experience. When I say customer, I mean audience. A lot of the innovation has not been incredibly empathetic with speed, cleanness and [data] lightness of the products. That's part of what has gotten us here. Steve Carbone, managing director and head of digital and analytics, Mediacom: The other part that has made this a big issue is the Apple [iOS 9] technology has also blocked attribution. The fact that the attribution piece is now also becoming an issue and our ability to actually track and measure has made ad blocking pop up and become a much bigger issue on our side. Ben Williams, communications and operations manager, Eyeo GmbH, maker of Adblock Plus: I think all of those things are fair points, but I don't want to overemphasize the impact that Apple's new capabilities for iOS 9 have had on ad blocking. Ad blocking has always been mainly a desktop phenomenon. We are the biggest ad blocker, and we alone have 400 million downloads of our desktop product. I don't want to take away the importance of what Apple did, but I do think that it was already quite a large phenomenon and perhaps something that a lot of people were OK with ignoring. Brian Kennish, CEO, Rocketship, maker of Adblock Fast: Inherent to what some of the folks are saying is that the ads that are being shown on the Web have just gone overboard and people don't want to see them anymore in contrast to ads in other mediums like TV and on radio. The fact is that ad blockers are going to wherever the technology allows them to go. Ad blockers are allowed on [Google] Chrome, some of the other browsers and are now allowed on iOS because they're going there. Building an ad blocker for television or radio is much more technically difficult. I s there any pushback to the narrative that the publishing and advertising community didn't realize soon enough that they were inundating consumers, particularly mobile users, with advertising? Kennish: If you gave people an easy way to block ads on TV and radio, they would block ads there, too. I'm talking about the similar sorts of percentages that you're seeing among Web users. I'm guessing that about 10 to 20 percent of Web users who have ad blockers available to them today are actually taking advantage of them. Hartman: We built a dashboard to monitor pixels per page and then look at the root of where the pixels came from and how much is from rendering the editorial page and how much is from advertising. Sometimes, the advertising [portion] is a staggering number—hundreds of pieces of code for a page. Because of that, the effect on load time is significant. That is different than just having an ad serve a purpose on its page. Some of the pixels in there are not necessary in impacting the user and perhaps collecting reasonable data to deliver smart advertising at another time. Lisa Valentino, chief revenue officer, Condé Nast Digital: I think that we're all getting a lot smarter about how we can speed up a load time, how many ads [work] per page. The reality is, we're probably all behind the eight ball a bit in terms of fostering real creative innovation, especially in the mobile space where most of this content is now being consumed. I haven't seen a digital or mobile piece of creative that has tugged the same way as television creative. I'm making huge generalizations here, but I do think creative is such a big part of it that we have just ignored and focused so much on the tech. As a result, we may be in a world where it's more beneficial for consumers to feel like they need to block ads. Belsky: Digital advertising has to be about utility and efficacy versus ubiquity and trickery, which is sort of what it's become about. The entire industry is predicated on a value exchange where everyone has to win—consumers, brands and publishers. But the pact has been corrupted and diluted lately with too much ubiquitous, and frankly, terrible advertising. Brands and agencies have to play a more active role—forcing the industry to have smarter, richer and better formats. Valentino: In the last two weeks, I've heard more companies saying, "Next year is all about branded content. You can't block branded content." We're getting into the branded-content business because we're great at storytelling, and we can do that for advertisers, we think, in a bigger way—not because branded content doesn't get blocked. It's unfortunate to hear that groundswell. Williams: If you're serving a native ad, it certainly can be blocked. Anything can be blocked, if the coder chooses. Valentino: It's interesting because when we look at the performance, we've actually decreased the number of ads per page. We released a number of high-impact units this summer where the performance has been off the charts. These are probably the same ads that are getting blocked because they're "larger" than average. How much of Condé Nast's traffic is getting blocked? Valentino: We don't have a public number that we're out there talking about, but I will say it's an absolute part of the conversation internally. We've spent a lot of time this year on looking at all of the bad behaviors that are going on across our network to try to make sure that we're improving the consumer experience as much as we can. By doing that, we're seeing time per page go up. We're seeing total pageviews go up. That is what the digital folks know how to do really well—it's the tech stuff. The other piece is that we've spent the last 20 years saying that we need the creatives to pay attention. The real smart creative folks out there need to think about formatting for a smartphone. That's why so much of what we're doing now is in-house because we've got to start putting that kind of stuff first in addition to all the tech work that we can do to make ourselves faster, smarter and more efficient. How much more work are you doing in-house now compared to a year or two ago? Valentino: So much more. Frankly, I would be lying if [I said] it was on an exclusive basis. Oftentimes, we are working across several agencies: creative agencies, PR agencies for a lot of our branded work. Many different folks are at the table, including clients. We have to get back to what we know how to do really well, which is create great content experiences. Hartman: We know the percent of ads that are blocked across each platform, and we're monitoring the effect of iOS 9. It all depends on the trend. If nothing stops the trend, it's four years out when ad blocker usage meets average direct sell-through on large websites—nonprogrammatic sell-through—which tends to be the highest CPMs. When ad-blocker usage meets that number and begins to attack higher CPMs, then it becomes a real pain point for publishers. The most important thing we can do is not complain about folks using ad blockers or building ad blockers—that's missing the point. The most important thing we can do is attack the root of the demand for an ad blocker. It's very hard to bring incremental value without getting some slowdown due to code in the ad. I think that's a good lesson for all publishers and our advertising partners for what we should really try to do. You can only control what you can control. We have a dialogue with our audience. Carbone: We've created this problem together. It created a bad experience, and users are now voting everybody off the island. We have to start creating quality ad content that [consumers] are capable to see value in it. And until that happens—I think it's going to take time—we're going to be in the situation we're in today where everything is going to be voted off. Ben and Brian, do you have a forecast for where you think your app downloads are going to be in six to 12 months? Williams: I really have no idea. It depends on the pickup from mobile and there are so many competitors out there. Kennish: We're brand new, we're certainly not in Adblock Plus' territory. We've been out for about a month on Chrome, Opera and iOS 9. And we have just over 75,000 users. Are you going to buy ads to drive downloads? Kennish: There certainly are ad blockers who I've seen doing so. We are not one that has. Our ad blocker is completely free, so we have no budget to buy ads. It's also open source, so anyone can take the code, rebrand it and launch it as their own app. We don't have that same incentive to drive huge amounts of users or to run ads to get people to run our ad blocker, which is, as I can hear from some of the chuckles, kind of an ironic way to do business. Marco Arment pulled his app Peace about a month ago because he didn't feel good about "hurting" other people. Kennish: I don't share that philosophy with Marco. I don't want to portray myself as some kind of philosopher, because I'm certainly not, but I think it's difficult for the advertising and publishing industry to stand on a moral high ground when it comes to this issue. The track record is that the industry has been using possibly shady, psychological tricks to get people to buy products that they usually don't need and sometimes are even harmful for them. In the past, [that was] cigarettes and alcohol, and today it's soda and other junk food. I don't really have a problem if someone says, "Hey, I don't want [ads] on the computer or on the device that I bought." I really have no moral issue with users making that decision for themselves. Williams: From my side, I publicly applauded him for what he did. I thought that he did the right thing because he didn't feel good about what he was doing. Although at the same time, I somewhat agree with what Brian is saying because at the end of the day, our solution can be turned off. So we ultimately do give control over what users see. Users have always had control on the Internet, and my way of thinking [is] that they should and that they always will. Our stance in general is that there are ads out there that can provide value online—it's getting to those ads that should be the goal. Does anyone on the advertising side have a reaction to what Ben or Brian said? Valentino: Whether you're a creator out of your garage, a creator that has influencers in the millions or a media company that is in the content-making business, there are economics that are significant in being able to create content. If we block every ad there is, there will be no content. That is a very dramatic position to take, but there's some truth to that. We're overloaded with content on every device, every second of every single day. So, maybe [ad blocking] normalizes that to a certain extent. It feels like we're in that moment where there are intentions from a lot of these technology companies, [and] it's hard to tell what those intentions are. There are media companies that have maybe been egregious in terms of letting things go way too long. We've got to come to a middle ground, because the consumer will wind up losing at some point if we don't figure it out. I'm sure we will figure it out. I think everyone here and many others are committed to figuring it out, but it is a pretty intense situation right now. Kennish: If we went to a point where there was no more advertising, why do you say there would also be no more content? Valentino: Well, most of the content creators are funded directly from advertising revenue. It allows you to spend billions of dollars on rights if you're in the entertainment business, in the sports business. So, if you could block every sports ad, those companies would have a hard time paying for those rights. The point is, we've got to find a middle ground that allows consumers to get the content they want as fast as they want it in all of the ways that they want it and still be able to create great advertising connected to it. Hartman: I agree. Some of the small, pure-play digital operations were built on display, which is a depreciating asset as it is. We've all seen [the Adobe and PageFair report]—the numbers are staggering. In the end, I believe that there will be premium content makers providing consumers with a wonderful experience. I just don't know when that is and how much pain will be between now and then. It could be an agreement with the consumers where it's more like a traditional model, such as ours, where some people pay us for our content and others don't. We also make money on advertising. One of the challenges with ad blocking is [that] a publisher is a messenger. We are creating more ads, we have our brand studio that does so, [but] most of the time we're porting ads from our advertisers and we're just the messenger. They're being blocked, and we reap a lot of the financial pain. We're sort of shooting the messenger. Belsky: I think it's also important to recognize, especially for those of us who have been in the industry for a while, that ad blocking is just one hurdle in a series of hurdles that have existed in digital advertising since this started. We've had an opt-in email debate, there's frequency-capping hurdles, there's faulty IP-targeting issues, there's bots and fraud and now ad blocking. It's like a long-distance Olympic hurdling race for those of us that have been in this since the late '90s. Are agencies, ad creators, buyers and publishers communicating on a regular basis more now than they were in the last few years because of the ad-blocking phenomenon? Carbone: I would say it's maybe a marginal increase. It's not like it's dominating every conversation. Every since this became more public, we weren't running around like this is a big, huge concern. We've had publishers come in and raise the topic with us, and we've had specific partners come in and say, "We have our own technology now. It's going to block the ad blockers." And I'm like, "Whoa, don't do that to me!" If you're going to block the ad blockers, I don't want my users seeing ads that they don't want to see. And I certainly don't want my brand being put in a situation where a user who wanted to block an ad, then sees it and it has a negative effect. If the experience is bad, the experience is bad. All of our research tells us that it's not that users don't want to see ads—it's that users don't want a bad experience or an experience that's now cluttering up their ability to get the information that they want to get to quickly. What do you think about publishers paying blockers to show ads? Carbone: To me, it's a little bit like extortion. I don't want to be in a space where publishers are paying to be white listed. I want the publishers to be white listed because they're doing the right things. Williams: Just for clarification, other ad blockers may do that, but what you just described is exactly how our white listing works. Valentino: We should be very vocal about who those players are [though] because that is absolutely ridiculous. That goes against everything we've just talked about for the last hour. That is really disgusting to even listen to. Williams: I know that they exist, it's just that there's a lot of misinformation about how ours works. I'm not accusing anybody because I personally have never seen it, but, again, it's possible. Brian, does Adblock Fast do that? Kennish: No. We don't have an "acceptable ads" program. I'm completely opposed to it. I'm not going to outright say it's extortion because the definition of extortion is that it's something that's illegal, but it's legal extortion. What I keep trying to get at is, how do you know that users really want these ads? How do you prove that? Hartman: We are researching just that. So we've had campaigns in a research experiment where we're talking to our users and finding out what is intrusive, what they would see as part of an overall package with content. We have a brand studio that creates the best possible advertising experience geared toward our audience, but by that we're talking to our audience first to find out what type of advertising they find valuable and bringing incremental value in terms of platform video, and there's types of native and so forth. We're doing it by asking our specific audience and then trying to give them more of what they want—and less of what they don't. This story first appeared in the Oct. 26 issue of Adweek magazine. 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