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12 November 2015

Ad blockers to drain $41 billion of global ad spend by 2016

Ad blockers robbed an estimated $21.8 billion in global advertising revenues in 2015, and this is forecast to rise to a phenomenal $41 billion by 2016 – 14% of the global ad spend.

According to a report from Adobe and PageFair, 16% of the US online population used a form of ad blocking software during Q2 2015, increasing 48% from last year to 45 million monthly active users (MAUs). The problem is even worse in Europe, with 77 million MAUs in Q2 of this year.

This poses a serious threat to the revenues of publishers and broadcasters – video protection is a pricey affair and therefore video advertising comes at a cost, which also produces a very high cost per impressions (CPMs). The value exchange debate remains that publishers need to advertise to survive, but consumers should have the right to block any disruptive advertisements if they so choose.

The ad blocking sensation originated largely among online gamers who developed software to prevent any unsolicited interruption from browser ads. Dish and TiVo then led the way for video ad-skipping on DVRs, coming up against a few legal hurdles on the way, before SVoD services stole the show with ad-free content that inspired the binge-watching generation, perfected by Netflix.

Google was among the first to realize the impact that ad blocking could have on its revenues, and introduced an ad-free browsing program for $1 to $3 per month. Now, ironically, Google, Amazon, and Microsoft pay Adblock Plus a fee equivalent to 30% of the additional revenues it would make from being unblocked, to have the “acceptable” ads unblocked (ads that are not disrupting or distorting page content). Adblock Plus is by far the most popular software, with over 400 million downloads.

Methods such as those used by Adblock Plus usually work via a browser plug-in, where it monitors outgoing ad requests, and then filters and blocks the ads before a request is made to an ad server – skipping directly to the video content.

Video streaming and analytics company Ooyala recently published a white paper covering ad blocking, to promote its Anti-ad Blocker technology. It says the two main options for anti-ad blockers are server-side ad stitching (SSAS) and client-side video plug ins. SSAS works by stitching ads directly into the video stream so ad blocking software would block the content in its entirety – but more advanced ad blocking software can still get around this.

Online gaming sites have an average ad blocking rate of over 50%, while those for fashion and lifestyle sites are 35%, and entertainment around 29%, according to Secret Media, also a provider of anti-ad blocking services.

It’s worth noting that Secret Media, PageFair, and Ooyala all have vested interests in exacerbating perceptions on the ad blocking problem faced by online publishers. After all, figures from the Adobe and PageFair report state there were 198 million monthly active users for major ad block browser extensions – which is only 6% of global internet users.

Similarly, US hosted media firm Brightcove recently launched Brightcove Lift, an advertising optimization system, which helps publishers, broadcasters and OTT providers to maximize video ad revenue across mobile and desktop. It uses a combination of server-side ad insertion and an HTML5 player management service. Brightcove said that Vox Media has already agreed to use it.

Before the release of iOS 9 earlier this year, it wasn’t evidently simple to install ad blocking software on your mobile device, with an overwhelming 98% of downloads occurring on desktop. But with around 40% of all web browsing now on smartphones and tablets, it was only a matter of time before the ad blockers followed. Adblock Plus is also available on Android to block ads within Chrome and Firefox, these two browsers make up 93% of the global share of mobile ad blocking by browser, according to the Adobe and PageFair ad blocking report. Ad blocking hasn’t yet fully migrated to the app ecosystem, but when it does, it will surely have a devastating impact on mobile app publishers.

Adblock Plus recently won its defense in court for the right of consumers to block online advertising in their browsers. The lawsuit was launched by global publishing house Axel Springer, who the German court ruled against. This is the fourth time that German courts have awarded Adblock Plus a legal win, following German publishers Die Zeit and Handelsblatt, and broadcasters RTL and ProSiebenSat.1.