Local News Media on Ad Blockers: ‘We’re Not Hemorrhaging Revenue’

When Apple disclosed in September that its new iOS 9 operating system (OS) would accept ad-blocking apps, Ben Ilfeld, co-author of a widely publicized analysis by 10up Inc., said revenue loss projections should “set off publishers’ alarm bells.” He added: “Include desktop ad blocking…and the overall picture might be far worse, even in the short term.”

To see how publishers have been affected initially and what they’re doing to protect their ad revenue, I went to Thomas Sly, who occupies two roles that bring him face-to-face with ad blocking. He is vice president of digital revenue at E. W. Scripps Co., whose 33 TV stations across the country all have desktop and mobile platforms that depend on ads for their revenue, and chair of the committee the Local Media Consortium (LMC) set up to respond to the threat. The LMC represents more than 70 media companies that operate over 1,600 newspapers and TV stations. The digital platforms of these “legacies” generate a total of 15 billion ad impressions monthly, all of which are vulnerable to blocking tools that generally cost in the range of $10 per month, with some blockers offering their tools for free and relying on volunteer contributions.

Apple’s release of iOS 9 has shifted the focus of ad blocking to mobile platforms. Does the emphasis on mobile make sense? 
Apple’s release of iOS 9 and its ad-blocking capabilities only heightened the awareness of the issue. Ad blocking, especially on the desktop, has been around for years. The vast majority of ad blocking still occurs on desktop. From LMC members that are running ad-blocking analytic technology on their sites, we continue to see about 15 percent of their desktop ads being blocked and less than one percent of the ad blocking occurring on mobile devices. It appears the release of iOS 9 has been far more effective in growing awareness of ad blocking than it has in actually increasing usage of ad blocking on mobile devices.

LMC’s October report on ad blocking indicated the impact on publisher revenue wasn’t huge, at least so far — is that still the case?
The majority of our publisher members are continuing to see digital ad revenue grow and most of the larger companies are experiencing healthy double-digital levels of growth. Most of this increase is coming from growing digital audiences and more local advertisers increasing their monthly digital ad spend. They also are replacing what we knew as remnant with programmatic ad revenue via exchanges like the Local Media Consortium’s own, where we can provide greater transparency to national and brand advertisers around the audience they are buying and the quality of the sites where their ads are appearing. With this transparency, national and brand advertisers are willing to pay a higher CPM, so the loss from ad blockers appears to be more of an opportunity loss for publishers than an actual revenue loss. It’s real and it’s revenue we would like to recapture, but it doesn’t appear that publishers are hemorrhaging revenue.

So are publisher concerns overblown?
We’re not naive enough to think that ad blocking is over and it’s a non-event. We believe ad-blocker adoption will continue to grow and have recommended that LMC publishers develop a strategy that will allow them to continue providing quality local journalism to their audiences while being able to offset the expenses associated with creating this content with advertiser and sponsor messages. The challenge is how to execute in a way that is palatable to the audience.

Your report’s analysis of inventory recovery indicates that publishers can recoup as much as two-thirds of revenue lost to ad blocking by using inventory replacement tools. That’s still a major loss of revenue, isn’t it?
The loss represents roughly 15 percent of a publisher’s ad inventory. The majority of our members sell 50 percent or slightly more of their ad inventory to local SMBs at higher CPMs. The remainder is sold programmatically through the LMC Exchange or other programmatic partners. The rates are lower on programmatic and thus the loss is not as significant as if it were directly sold at higher CPMs.

Creating quality local news content is expensive and we’d like to maximize our ability to monetize this content. That is why we’ve recommended that our members use ad-blocking analytics technology on their sites. Utilizing this technology enables them to first understand the impact to their sites and from there develop a strategy that will enable them to recapture as much of this revenue as possible.

Is inventory replacement working?
It’s still very early in the game, but from what we are seeing it appears that the technologies available are working against the majority of the ad blockers we are seeing today. However, there are ingenious developers on both sides. One of our member blocked all site visitors using ad blockers. If users came to the site with an ad blocker implemented, the content was blocked by a message that told them that to see the content, they would need to remove their ad blocker. Within six hours, the ad-blocking community had created a workaround. Although the community of ad-blocking hackers is small, they are vigilant. In some ways, this is a technology race. As publishers, we’re working to increase site performance, reduce ad-tech bloat, and provide a better user experience in hopes that the majority of our audience will be satisfied with improved performance.

How about what the LMC report called “lite registration” — offering a daily email to ad blocker users?
Most local news publishers are providing daily news updates via email. At Scripps, we enable our local visitors to sign up for morning and afternoon email updates as well as breaking news updates. But when you think about the power of digital media, it’s about being able to access what you want, when you want, and where you want. Our audience is looking for immediate gratification, so I’m not sure that an email update will solve this problem.

Are LMC members developing alternative sources of revenue in response to ad blocking?
We’re continually developing new sources of revenue. The majority of our publishers continue to see healthy year-over-year digital revenue growth. Whereas ad blocking is siphoning off a small amount of this growth, we have many initiatives that are growing revenue. Recapturing lost ad impressions and revenue from ad blocking is certainly something that is on our radar. Beyond that, there is still so much opportunity that it’s a matter of leveraging the publishers’ resources to identify the areas where they see the greatest immediate return. This varies by market, publisher, and the parent company.

The LMC report said “media companies need to reexamine our overall approach and focus on fewer, higher-value ad units, and a better user experience.” What is LMC doing to help create a better user experience?
LMC is a member organization, so we don’t own or control any of our member sites. We provide analysis, thought leadership, resources, and recommendations to our members, including:

• Implementing ad blocking analysis technology on their sites so that they can understand how ad blocking is affecting their sites.
• Developing a strategy to address the loss. Whether implementing ad-blocking recovery technology, white listing, or some other process, it’s important to have a plan.
• Focusing on site performance, especially on mobile devices, as mobile bandwidth will affect both the user experience and publishers’ ability to monetize their content.
• Steering clear of the “nuclear option,” whereby members block content to ad blockers; this is not a realistic long-term solution today.

Typically, we see the larger member companies move relatively quickly and the smaller member companies following over time. LMC member companies share best practices and lessons learned, so we have a large base of publishers implementing different solutions, sharing their results. This enables members of all sizes to learn from each other.

Most of the larger companies are working on creating lighter sites that perform better on mobile devices, minimizing ads that are viewed as excessive, and providing the best possible user experience while enabling their sites to provide great local journalism and make a fair return.

This interview has been edited for length and clarity.

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.