The move didn’t have the surprise of a slap hook from Floyd Mayweather — it was telegraphed last June — but it landed smack on the unprotected chins of publishers big and small and sent their heads spinning.
What happened on September 16 was Apple’s by now well-chronicled approval of ad blocker apps for users of its new iOS 9 operating system (OS). The first blocker apps to launch affected only web browsers on iOS mobile devices, but Apple has since approved an app that blocks ads in other apps.
As a recent comScore study of U.S. smartphone users noted, time spent with mobile apps has grown at a far faster rate over the past three years than time spent with either the desktop or mobile web, but both the mobile web and the desktop still have much larger total audiences than apps. That means iOS users continue to consume large amounts of content via Apple’s Safari web browser, where blockers can disrupt not only ads but also analytics and other content.
Web design and development agency 10up Inc., which helps publications like Time Inc.’s Time and Fortune magazines and AOL’s TechCrunch manage their digital content, has issued a report on what it sees as the likely impact of blockers on ad revenue, based on “low” and “high” scenarios. Mashing together what it knows with informed guesses, 10up predicts that revenue losses will range from 3.7 percent in its low scenario to 11 percent in the high one. And that’s just for the near term.
The 10up report, co-authored by Ben Ilfeld, lead audience and revenue strategist, and Jake Goldman, president and founder of the Portland, O.R.-based company, notes that blockers have been available on desktops for years without setting off alarm bells. The current adoption rate on desktops is 15 percent, 10up says, quoting PageFair. Looking at all the media hoopla around Apple’s new OS, the 10up report projects a different scenario for blocker apps on iOS devices: “The stage seems to be set for significant and swift adoption.”
More widespread adoption of blocker apps will affect publishers differently, depending on their size. The most vulnerable publishers, according to 10up? “We think the ‘fat middle’ is at the epicenter of this change,” the report states. “[This is] ‘medium’-sized publishers with dedicated staff who rely on the web for distribution and carry the costs of a small business. These business are typically characterized by thin margins. A 15 percent dip can be the difference between success and collapse.”
The Local Media Consortium (LMC), which represents 60 news publishers, spent part of its two-day high-level meeting in Denver last week organizing a response strategy it hopes to have ready in two weeks. LMC publishers have more than 1,600 daily newspapers and hundreds of broadcast stations. All these properties have digital platforms, and about half of their four billion-plus monthly pageviews are on mobile. Even the fraction of that traffic that comes from iOS devices is a big number to be threatened, so LMC publishers are looking at all options to protect themselves.
“Native advertising, sponsored content, paywalls, and other non-display revenue are certainly possible responses to this impact on revenues,” Todd Handy, a member of LMC’s Executive Committee and its new “ad blocking committee,” told me. “But the committee will also consider the best way for media companies to engage with their users in a dialogue about the value of their content, and potential ways in which users can partner with media companies to continue to consume their content while not adversely affecting their business models.” As vice president of advertising strategy and products at Deseret Digital Media, whose brands include the the daily Deseret News in Salt Lake City, Handy has an especially keen interest in the impact of ad blocking.
Those on the advertising and marketing side also are closely monitoring ad blocking developments. Ron Blevins, vice president of digital strategy at Novus Media Inc., the U.S.-based local arm of Omnicom Group, the international ad agency holding company, explained his firm’s response: “We’re taking a proactive wait-and-see approach. We’ve yet to see a negative impact on our ability to deliver the impression volumes needed for our clients. However, we anticipate that at some point we will. Leading up to that time, we’re working with our partners to forecast impact and develop contingency plans. We’re also educating ourselves on the operational impacts this will have, such as how third-party ad servers interact with ad-blocking browsers, and the impact that has on things such as reporting.”
With reactions coming fast and furious, I went to 10up report co-author Ilfeld for more details about the implications of iOS ad blocking and how publishers can respond:
Are publishers with fat profit margins OK?
Revenue loss predictions in the range of 3.7 percent to 11 percent should set off publishers’ alarm bells if their profit margins are fat or thin. With our predicted range of losses, we’re taking a very narrow approach to the ad blocking challenge: just iOS 9 and just the next eight months or so. Include desktop ad blocking — 15 percent of U.S. users and growing exponentially — and the overall picture might be far worse, even in the short term. Consider that one carrier has even started blocking ads at the network level and the risk is even greater. Take that analysis out a year or two further and the numbers get vague, but revenue losses become potentially large.
The Mobile Majority, which serves ad buyers, isn’t too worried. Its report says the impact on user time is likely to be in the 0.4 percent range. What’s your reaction?
The Mobile Majority report is much scarier for publishers if you read it through. Mobile Majority’s quoted eight percent adoption rate seems rather low to us. Plus, they aren’t taking into account the outsized ad revenue from iOS users or that adopters are likely to be larger web content consumers in more profitable demographics. Our report is specifically for publishers. We took great pains to identify all factors contributing to the revenue hit for these publishers.
What should be publishers’ main strategy for countering potential revenue losses, especially those in what you call the “fat middle?” Should they aim for more non-display revenue like native ads or experiment with paywalls?
Each publisher must take its own path. Native ads might be a great way to go, or might be wholly inappropriate for the publication. Using a leaky paywall/membership program might work for some.
There are still plenty of ways to drive revenue, but as every publisher knows, the question is more about fit, resources, and time. Now is the time to address this question, audit exposure, and outline strategies to test and adopt.
What are other realistic options for publishers?
Let me list a few:
- Co-opt popular ad blockers by buying into whitelists, which would allow ads from a particular domain or ad network to appear.
- Work with ad blockers on standards to whitelist non-intrusive ads and for performance through a third party.
- Legislation or litigation.
- Block traffic from those utilizing blockers.
- Work with new technology vendors to technically circumvent the blockers.
A more holistic response is less likely. Publishers aren’t all members of one large corporation that can act with one voice and intention.
Tom Grubisich (@TomGrubisich) writes “The New News” column for Street Fight. He is editorial director of hyperlocal news network Local America, and is also working on a book about the history, present, and future of Charleston, S.C.