Yes, There Is a War on Advertising. Now What?

Apple has been scaring up apocalyptic predictions for the future of advertising ever since it said its forthcoming mobile operating system would make it easier for apps to block ads in Safari browsers on the iPhone. Encouraged by the company, the scenario goes, consumers will shut marketers out to surf a perceived faster, cleaner, less-invasive web -- until the free internet collapses for lack of ad revenue. But the truth is the horsemen were in the saddle well before the new operating system, which arrives on Wednesday. Consider: Ever since the advent of the DVR, it's clear that given the choice, many, if not most, consumers would rather skip ads pretty much anywhere they encounter them. But the implications run much further for the $58.6 billion digital ad business. The blocking movement has the potential to "threaten the economic viability of the media" and push more and more content behind paywalls, according to Dan Jaffe, the top lobbyist for the Association of National Advertisers. The world could split into information haves and have-nots, who can't or won't pay for the information and entertainment that's now free thanks to advertising, he told Ad Age last week. "Potentially, this could change the whole economic structure of the internet," he said. Is it too much to call it a war on advertising? The threat might be overstated. Some of the hype around the trend this year has come from players with a vested interest, such as PageFair, a company that promises to help publishers "reclaim your adblocked revenue." (It replaces barred ads with ones that meet Adblock Plus criteria for lightweight, nonobstructive ads, smoothing the way with a small fee to Adblock Plus.) It was PageFair and Adobe that issued the report claiming 45 million active ad blockers in the U.S., along with interesting tidbits like the most ad-blocky state (Oregon, where 16.4% of ads are blocked) and the most blocked browser (Google's Chrome). The directional signals, however, are anything but encouraging. The industry has taken tentative steps, like beginning to research lawsuits against ad blockers or taking refuge in branded content that consumers might like and ad blockers might miss. But largely, the ad industry has no coherent strategy to confront a movement that threatens its online existence. That's partly because whatever popularity ad blockers gain reflects consumer wishes. Forcing ads on people who've gone out of their way to avoid them doesn't bode well for the brand messaging therein. "We don't want to anger consumers," Mr. Jaffe said "Everybody needs to move carefully." In the same breath, many industry executives say it's finally time to get a plan together. "It had to get big enough to be an important issue, and I think we've reached that inflection point," said WPP Digital President and Xaxis Chairman David Moore, who also serves as chairman of the board of directors for the Interactive Advertising Bureau's Tech Lab. The IAB broached the topic during its board meetings in May and followed up with a member summit in July that convened the IAB and IAB Tech Lab boards as well as a number of sales and technology executives. One suggestion: Follow the lead of Hulu and several other sites that refuse to show content when visitors arrive bearing ad blockers -- but take that approach much bigger. "I advocated for the top 100 websites to -- beginning on the same day -- not let anybody with ad blockers turned on" access the sites, Mr. Moore said. The Washington Post last week began experimenting with the approach on its own site at least. "The test we're currently running uses a few different approaches to see what moves these readers to either enable ads on The Washington Post, sign up for a newsletter or subscribe," a spokeswoman said, adding that the company works to respect users' privacy and keep intrusive ads out. "Many people already receive our journalism for free online, and in the long run, without income via subscriptions or advertising, we won't be able to deliver the journalism that people coming to our site expect from us." More content producers should insist consumers let them serve ads, said Eric Franchi, co-founder of the ad network Undertone, one of many companies that stands to lose as blocking takes hold. "What if those publishers asked consumers to whitelist them in order to be able to access content?" he wrote in a recent email newsletter. "This would be a flight to media quality. An old colleague of mine used to call it 'media that matters.' Publishers whose content is unique and matters enough to consumers to be whitelisted naturally survive and in fact thrive in this scenario." Attendees of the IAB meeting rated the top-100 blocker-blackout "a good idea," according to Mr. Moore -- with slim odds of seeing it actually happen. Late last month, the IAB Tech Lab held another meeting, this time bringing together four CEOs of companies that counter ad blocking -- PageFair, Secret Media, Sourcepoint and Yavli -- to school the IAB's domestic and international members on the technological ways to fight back. "The most important takeaway is that the ad-blocking firms themselves all reference very similar centralized lists of code to block," said Scott Cunningham, a senior VP at the IAB and general manager of its Tech Lab. That means publishers may not have to fight a war on multiple fronts against each of the individual ad blockers, but could instead identify a way to combat them simultaneously. "At this stage of the game, it's going to be up to the IAB to sort out what the most viable option is and get back to the membership for their input," Mr. Moore said. "Once that occurs, I think you'll see a strategy emerge before the end of the year." Web publishers are also exploring the possibility of suing the ad-blocking companies. The ad blockers "are interfering with websites' ability to display all the pixels that are part of that website; arguably there's some sort of law that prohibits that," Mr. Moore said. "I'm not by any means a lawyer, but there is work being done to explore whether in fact that may be the case." "The IAB has a number of different outside counsels, and they're all counsels engaged by different companies," Mr. Cunningham said. "We're keeping a good temperature gauge around finding out what could be done." But the organization is far from a conclusion on whether legal action is a viable option. The other, perhaps more Pollyannaish avenue, calls for rethinking digital advertising before more consumers want to annihilate it. The IAB Tech Lab has organized one working group to determine how to serve ads without slowing down page-loading, one of the most cited reasons for people to install ad blockers, and another to research the attitudes of people now using ad blockers. While Hulu blocks people who block ads, other video players are considering less confrontational approaches. "We are definitely looking at different ways to address the issue," said Joe Marchese, president-advanced ad products, Fox Networks Group. "We are evaluating what we want our response to be. But before we say, 'No, you can't watch a show,' we want to be able to provide viable options." Since acquiring the ad-tech firm TrueX, which Mr. Marchese founded, in December, Fox has been testing ways to limit the commercial load on its digital platforms. Most recently, it introduced a commercial-free opportunity in "MasterChef Junior" in partnership with the California Milk Advisory Board. The sponsorship allows viewers to interact with a 60-second ad at the start of the show and watch the rest of the episode sans commercials. The "MasterChef Junior" partnership is an example of one way the industry can combat ad blocking, Mr. Marchese said. "The reason people are using ad blockers has a lot to do with the advertising ecosystem digitally," he said. "We can block the ad blockers, but technology always finds another way. It isn't a long-term solution. It's incumbent on us to find better answers and fix the relationship." Letting viewers select or direct their ad experiences isn't exactly new, with companies such as Hulu and YouTube having experimented in the area, but it remains the exception. Others are counting on branded content to irritate consumers less than display ads and, no less important, evade ad blockers' notice. Many sponsored posts survive the gaze of ad-blocking software, both on publishers' own sites and on social networks such as Facebook and Twitter. Delivering large reach for advertisers via that sort of advertising, however, probably requires distribution through those social networks, increasing publishers' reliance on allies that can be fickle. The good news is that even if Apple's move does make ad blocking in Safari easier and more popular, web browsers are not the key battleground on mobile devices. "The vast majority of activity is occurring in apps," said Brian Wieser, an analyst at Pivotal Research Group. About 90% of mobile content consumption happens in apps, Mr. Wieser said in a report this summer. Apps account for about seven out of every eight minutes of media consumption on mobile devices, according to ComScore's U.S. Mobile App Report. Advertising is following suit. Marketers will spend $20.8 billion to reach consumers via mobile apps in 2015 but only $7.9 billion on mobile browsers, according to projections by eMarketer. When mobile spending surpasses desktop advertising next year, eMarketer says, app ad dollars will reach nearly $30 billion, compared with the mobile web's $10.8 billion. Apple did not respond to a request for comment on how it addresses ad blocking in apps. But publishers should concentrate on protecting advertising there, Mr. Wieser suggested. "If you improve marginally how well you monetize app-based activity, that could more than make up for money lost by ad blocking on the mobile web," he said. But given the existing ability of AdBlock Mobile to erase ads from apps including The New York Times, publishers may need to figure out a way to protect ads there sooner than later. "We are aware of the issue of ad blocking and are studying it with some degree of concern, particularly as it pertains to mobile," said Michael Zimbalist, senior VP-advertising products and research and development at The New York Times, in a statement. "One of the things we are very focused on strategically is improving the quality of mobile advertising so that it is always respectful of, and additive to, the user experience." Contributing: Ana Radelat, Jeanine Poggi One of the most-cited reasons to install an ad blocker is to reduce the time it takes to load web pages. But how much of a difference do blockers actually make? Ad Age examined seven publishers' desktop sites including its own to see how quickly -- or slowly -- their home pages load with two of the most popular ad blockers installed, AdBlock and Adblock Plus. Using the developer tools built into Google's Chrome desktop browser and with caching disabled, Ad Age logged load times under three conditions: with no ad blocker running, with only AdBlock enabled and with only Adblock Plus. We ran each real-world test three times and calculated the average. The results were more ambiguous than the buzz over blockers would suggest, with some sites indeed loading more quickly when stripped of their ads -- but others more slowly. —TIM PETERSON

Yes, There Is a War on Advertising. Now What?

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