Ad Blocking Is an (Unexpectedly) Big Issue in China

New Research Suggests It's More Widespread Than Many Thought

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There hasn't been a lot of attention paid to ad blocking in China, leading many to assume it isn't a big issue yet. But new research suggests that perception is wrong.

A study by Omnicom's PHD in China found that about 10% to 12% of ads delivered to personal computers are being blocked, said Lars Bjorge, chief digital officer of PHD in greater China. The number is lower on mobile devices, at 3% to 3.5%, he said. That's because mobile advertising is focused on apps, where ad blocking is much harder than in browsers.

"What we are seeing is a higher degree of awareness of ad blocking than what was previously thought," Mr. Bjorge said. "The browsers people use to a large extent have ad blocking capabilities in them."

Before PHD started the research, the team thought people might not have those capabilities switched on. But "it seems that a fairly high proportion of them do," he said.

It's worth noting that even ad-blocking browsers do let a sizable number of ads through, he said, as their focus is on cutting out the most intrusive ads.

PHD's numbers are based on a panel study of 500 internet users across mobile and personal computers; Mr. Bjorge calls the study a "very initial stab at understanding the issues" and says the agency is following up with more research.

Browser wars
China has 668 million internet users, with 594 million of those on mobile. The mainland has a vast online ecosystem that is largely separate from the rest of the world, with its own platforms, search engines, social networks and browsers. Internet advertising is skyrocketing in China; GroupM projects it will grow 33% from the previous year.

People use ad blockers in China because the online environment can be cluttered with pop-ups and other in-your-face ads (especially in areas including online games), and because they are concerned about fraud and collection of their data.

Many of China's big internet companies offer ad-blocking browsers. One is mobile-focused UC Browser, which says it has over 100 million daily active users and is owned by Chinese tech giant Alibaba. UC Browser, which has a big user base in India along with China, promotes itself like this:

Browsers from Chinese internet companies including Baidu, Tencent, Qihoo 360 and Sohu also block some ads, according to AdMaster, a marketing data technology company that helps brands measure the effectiveness of their digital investments.

"In China, the browser market is very competitive, so if one browser has [ad blocking], then all others have to follow," said Wang Dong, AdMaster's head of advertising measurements and verification.

It seems counterintuitive that the companies promoting these browsers are all dependent on internet advertising. (Baidu and Alibaba, for example, are the No. 3 and 4 digital ad players globally, according to eMarketer.) But browsers can be selective about which publishers' ads are blocked by default on their browsers, and about what kinds of ads are targeted.

"Every publisher is thinking about how to make ads less intrusive," Mr. Wang said.

AdMaster did a questionnaire of 500 internet users in China; 86% percent of respondents had heard of ad blocking, and 31% said they use them.

Legal pushback
There hasn't been a lot of resistence to ad blocking yet in China. Xiaofeng Wang, senior analyst at Forrester Research, says the digital industry is more focused on better targeting capabilities.

Still, there are a few interesting examples. Video platform iQiyi filed a lawsuit against a company called that had created software allowing people to watch its programming without the pre-roll ads. In August, the court ruled in iQiyi's favor and ordered the competitor to pay about $15,600 in damages. In an analysis of the case, the Hogan Lovells law firm wrote that "as China is increasing its level of intellectual property rights protection – which frequently applies to online content – the courts seem to find ad revenue-based business models worthy of protection."

With more people in China using blockers, browser-based banner ads will be the most affected, Mr. Bjorge of PHD said. Video advertising, which is huge in China, currently isn't as targeted on PCs and is shielded by operating in apps on mobile platforms.

Because there's a higher percentage of ads blocked on computers, "certainly ad spending on mobile will have a better environment than on PC," Mr. Bjorge said.

More broadly, the rise of ad blockers in China is a reminder that China's consumers are getting more wary of advertising, "like everywhere else," Mr. Bjorge said.

"Just bombing consumers with ads doesn't work anymore," he said. "You have to integrate it into content and engage with consumers in new and creative ways."

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