Ad Age Imagines a World Without Ads -- and It's Not Cheap

"Welcome to a commercial for Hulu's new commercial-free option," intones an elegant, bespectacled gentleman in a new TV spot. He's sitting in a wingback chair with a thick book on his lap; there's a roaring fireplace to his right, a teapot on a table to his left. "And now we're reading from the dictionary," he declares as he flips open the book to one entry: irony. Yeah, tell us about it. It's worth noting that this gentleman is outdoors. He has no roof over his head or walls around him; his furniture and fireplace are simply plopped on a stretch of crumbling pavement in a seedy vacant lot (in Brooklyn, looks like), with an elevated subway line rumbling in the background. What's the message here, pray tell? Is our hero homeless? Has the additional financial burden of the so-called No Commercials plan ($11.99 per month, four dollars more than Hulu's euphemistically-named Limited Commercials plan) broken his household's bank? Regardless, the effect is vaguely post-apocalyptic -- which makes sense if you consider what could happen if everything were commercial-free. In a way, we already know. As Ad Age has reported, Apple's decision to support iOS apps that block ads within its Safari web browser has the digital-publishing world quaking. At least 34% of all U.S. adults use ad blockers already, Interactive Advertising Bureau President-CEO Randall Rothenberg wrote in his recent Ad Age op-ed, "Ad blocking: the unnecessary Internet apocalypse." "Some websites, particularly those with millennial audiences, are already losing up to 40% of their ad revenue because of ad blocking," he added. Now round that up to 100%, across all media, and imagine what we're calling, in a perverse but timely thought experiment, A World Without Advertising. Consider it something of a love letter to the industry, which has been keeping the lights on at a lot of places we like. Marketers are expected to spend $189 billion on advertising in the U.S. this year and $592 billion worldwide, according to eMarketer. Picture the human cost within just the ad industry alone if that spending went away -- all the creative-directors-turned-Uber-drivers, for starters. And the Geico Gecko having to panhandle to support his cricket and mealworm habit. (Did you know 15 minutes could save you 15% or more on your car insurance? No, you didn't know that, and no one else knows either.) And Flo from Progressive having to wait tables at IHOP -- until she loses that job too when IHOP revenue plummets as consumers collectively begin to forget the very existence of Rooty Tooty Fresh 'N Fruity Pancakes. Not to mention a drab, gloomy Times Square devoid of giant Coke bottles and hulking M&Ms, prowled only by half-naked painted ladies and creepy Elmos. To all the ad haters and ad blockers out there, well, keep this in mind: As famed copywriter Oscar Wilde once wrote, "When the Gods wish to punish us, they answer our prayers." For the sake of enlightening argument -- to carry the ad-blocking pipe dream to its logical, horrific extreme -- Ad Age did some back-of-the-envelope math on what some prominent ad-supported media might cost if all ad revenue went away. To wit: The New York Times: $300+ minimum for a year of digital In August, The New York Times Company announced some pretty good news. "We added 33,000 net digital subscribers in the quarter," Times Co. President-CEO Mark Thompson said. "That means that, in addition to our 1.1 million print-and-digital subscribers, we ended Q2 with 990,000 paid digital-only subscribers." (And then by the end of July, it passed the 1 million digital-only mark.) So: Good for the Times for attracting a critical mass of digital subscribers to help offset its massive costs ($344.8 million in the second quarter alone). Second-quarter circulation revenue grew 1% to $211.7 million while ad revenue fell 5.5% to $148.6 million. But what if consumers magically blocked all advertising from the Times? What if it had no ad revenue at all? For our back-of-the-envelope calculations, let's make one (entirely reasonable) presumption: that new circ revenue would come from digital-only, not print, subs. Currently, you can subscribe to the Times online -- the "web+smartphone" tier -- for $3.75 per week, or $195 a year (there are more expensive options, but let's ignore them for the sake of simplicity). To replace $148.6 million per quarter in ad revenue, the Times would have to find 3 million new subscribers willing to pay the current web+smartphone tier subscription price. That's not gonna happen, so let's make another (iffy) presumption: that Times readers are generally affluent enough -- and devoted enough -- to absorb a massive price increase. Right now digital-only subscription revenue is about $185 million per year (almost 80% of circ revenue still comes from the print edition). Bump the cheapest NYT digital sub up from $195/year to $334/year (still less than a dollar a day!) while not losing any print-edition or digital-only readers (good luck), and the Times can theoretically survive sans advertising without having to (further) slash its payroll or other costs. TV: 50% bigger bills and a lot fewer channels Here, at least, we've got a somewhat clear existing model, thanks to the rise of cord cutting and the à-la-carte-ification of TV. Beyond the No Commercials Hulu plan, we've also got already-commercial-free HBO's new HBO Now, at $14.99/month. Meanwhile, CBS All Access, at $5.99/month, lets you access over 6,500 episodes of TV on demand and watch CBS live -- but with commercials. So for the sake of argument, let's go with the Hulu math of a 50% premium for an ad-free version, in which case an ad-free CBS All Access might cost $8.99/month, or $107.88/year. Just for "The Big Bang Theory" and "The Late Show" and the like. That's actually not too far off from what most Brits have to pay their government -- £145.50 (about $225) for their annual "TV license fee," which supports the BBC. (A few dozen other countries, from Austria and Italy to Israel and Turkey, also impose TV fees on their citizens.) Then again, as The Guardian reported, the BBC announced 1,000 layoffs in July "to deal with the consequences of a £150 million funding shortfall next year due to increasing numbers of people failing to pay their license fees." With the unbundling of cable, the era of the "500-channel universe" is already presumed to be doomed. But without ad revenue, networks would have to rely entirely on consumers for income, either directly via streaming or indirectly via your pay-TV provider. And earlier this month, the Leichtman Research Group reported that the mean monthly spending on pay-TV service in the U.S. is $99.10 -- up 39% since 2010. Many of us already pay much more. Tack on a theoretical no-ad premium and ask: Can the average American household absorb, say, an $1,800 annual pay-TV bill? Probably not, so picture a $1,200 à-la-carte cable bill each year that gives you access to maybe a dozen ad-free channels, tops. Including C-SPAN and C-SPAN2. Facebook: Would you pay $12 per year? Facebook's revenue in the most recent quarter was $4 billion -- nearly all of which came from advertising. The social-networking giant reports that, as of June 30, it had 1.49 billion monthly active users. Simple enough, right? Each MAU need only cough up about $2.69 per quarter, or around $10.75 per year, for an entirely ad-free, user-supported Facebook. The problem is that most of Facebook's active users are outside the U.S. and Canada; in fact, more than 450 million users reside in what Facebook calls the "rest of the world" (everywhere but the U.S., Canada, Europe and Asia-Pacific), which includes the developing world, where it would be even more difficult to collect modest (by Western standards) subscription fees. In June, the Times published an op-ed by Zeynep Tufekci, an assistant professor at the School of Information and Library Science at the University of North Carolina, titled "Mark Zuckerberg, Let Me Pay for Facebook." Calling Facebook's profit per user -- 20 cents per month -- a "pitiful sum, especially since the average user spends an impressive 20 hours on Facebook every month," she envisions a paid Facebook that stops tracking its users (i.e., an ad-free Facebook). "If even a quarter of Facebook's 1.5 billion users were willing to pay $1 per month in return for not being tracked or targeted based on their data," she wrote, "that would yield more than $4 billion per year." So let's go with that: An ad-free Facebook shall cost $12 per year, with the monthly-active-user base dropping 75% to 375 million worldwide -- and Facebook's revenue also dropping 75%. Let's not talk about what becomes of Facebook's current $265 billion market cap. BuzzFeed: We have some bad news for you BuzzFeed says that last year it hit the $100 million revenue mark -- essentially entirely through advertising. As of May, ComScore places BuzzFeed at No. 26 on its list of the top 50 multiplatform media properties, with 76.7 million unique visitors per month (BuzzFeed's internal numbers are higher). Despite BuzzFeed's much-hyped investment in Legitimate Journalism, complete with news bureaus and seasoned political reporters, it's no secret that most of the site's page views come from its entertainment and lifestyle coverage. In fact, as of this writing, BuzzFeed's home page is stocked with stories like "Who Should You Date, Based on Your Netflix Choices?," "Does Coffee Make You Poop?," "Can You Guess 'The Simpsons' Character From Just Their Colors?" and "What Kind Of Penis Do You Deserve Based On Your Zodiac Sign?" Seriously, those are all honest-to-God real BuzzFeed stories, which prompts another question: "How Much Would You Pay for a BuzzFeed Subscription So You Can Continue to Waste Time at Work?" The answer, of course, is: $0. A World Without Advertising is a World Without BuzzFeed. As for BuzzFeed's core value proposition -- a gentle distraction from the existential despair of office life -- well, perhaps that function can be fulfilled some other way? Micro-doses of Zoloft in the water supply, maybe? Simon Dumenco, aka Media Guy, is an Ad Age editor-at-large. You can follow him on Twitter @simondumenco.

Ad Age Imagines a World Without Ads -- and It's Not Cheap

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