Facebook and Google are the 800-pound gorillas in online advertising because of audience reach and superior targeting. They enjoy another lesser-known advantage: they’re largely immune to ad blocking.
People install ad blockers to strip out marketing messages and the trackers used to target ads. They’re more widespread on computers but they’re migrating slowly to mobile too. Adoption varies by country, as the chart below shows. Analysts estimate that ad blocking cost web publishers nearly $22 billion in lost ad sales last year, compared with total internet ad sales of $160 billion.
Yet it’s becoming clear that the pain isn’t being shared equally, and this is more bad news for newspaper, magazine, and television companies. What started as a consumer movement sparked by rage about intrusive ads, security and privacy seems to be strengthening the internet’s big beasts.
Not only does old world media lack the tech chops to beat the blockers, their fragile finances make it hard to turn away ad dollars in the name of user experience. Google and Facebook’s resources dwarf the legacy publishers. But even when looked at on a proportional basis, old media’s investment in its own future is anemic. Last year, Google spent 16.4 percent of revenue on R&D, according to Bloomberg data, and Facebook almost a quarter. At Daily Mail & General Trust, owner of one of the most popular news sites, it was 3.6 percent.
Ad sales lost to blocking
Facebook is a textbook example of how technology enshrines advantage. While it was prey to ad blockers when most users preferred computers, it’s played a blinder in the shift to mobile. The ads within the mobile Facebook app (and its photo-sharing app Instagram) can’t be stripped out by blockers. They’re delivered by Facebook servers with none of the usual identifiers. The chart below shows how well this is turning out for Mark Zuckerberg and co.
Google’s main defense is its iron grip on search ads. These paid-for links, which appear by results when users look for information on plane fares or movie tickets, aren’t as annoying as pop-up ads or videos. One caveat: Google’s display advertising, such as banner ads or videos on YouTube, is more threatened by ad blockers than Facebook’s. Unlike the social media giant, Google ads aren’t sheltered within an app.
Yet this is small comfort for traditional media. Once ad blocking usage hits about 20 percent of the population, it really starts to hurt publishers, according to John Montgomery of WPP’s GroupM. The New York Times and others are desperate for online ads to make up the shortfall from print, but it’s hard going as the chart below shows. Falling prices for their online ads, which cannot match the targeting precision of Facebook or Google, are the main culprit, but ad blockers aren’t helping.
Since most publishers rely on external networks to sell their online ad space, the ads are easily identified and cut out by blockers. Efforts to coax people to turn off the blockers are becoming common, but have yet to prove effective. Blocking increases pressure on free sites such as the Daily Mail and Guardian to impose paywalls. But it’s tough to sell general news, which is freely available elsewhere.
One answer could be to turn to the web giants for help. A year ago, Facebook created a tool that hosts publishers’ content within the social network, theoretically taking them off the ad blockers’ radars too. Google has a similar initiative.
Yet such assistance isn’t free and makes old media ever more dependent on Silicon Valley for its future. Hardly a secure prospect for a beleaguered industry.
This is a Gadfly column from Bloomberg. This column does not necessarily reflect the opinion of Bloomberg LP and its owners.