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Executive Report - By Thomas Baekdal - June 2015

Ad-Blockers Are A Distraction From The Larger Issue

One big question these days is what the ad-blocking trend will do to the market. Is it something we should be concerned about? Will it destroy the internet? What about ad-blocking on mobile?

As you may know, the trend of ad blocking is booming. After many years of insignificant usage, mostly by technically inclined young men, ad-blockers are now moving into the mainstream market.

In 2010, only about 21 million people used ad-blockers, while by the start of 2014 we were at 121 million active users. And by the end of 2015, we are looking at about 250 million ad blockers worldwide.

Keep in mind that this is on a global scale, and it's still well under 10% of the internet population. However, things look even worse if we look at it locally. In Europe, some countries averaged 24% in 2014, which means it's likely 30% today.

In the US it's even worse. Here it averaged 27.6% in Q2 2014, which likely puts it at 35% today.

That's a lot of ad revenue lost. And of course, when we look at each niche, and specifically the niches dominated by young men, like tech or gaming sites, the curse of ad blockers is reaching levels of 60% blocking.

This also influences channels such as YouTube. Several YouTubers (many of which are Let's Players) have told me that their revenue per stream has halved, part of that is due to declining ad rates, and part of that is due to more people blocking them.

It's not just the media that is hurt by this. Everyone is taking a hit, and the trend forward is pretty obvious. Ad blocking is a really big problem, and it's worsening quickly.

Five years from now, if this trend continues, ad-blocking will have reached a point where display advertising becomes uneconomical as a business model. It will still exist, of course, but at a level where it doesn't add much to the overall revenue for each publisher.

Now, a lot of people look about this with doom in their eyes. How can the internet continue to exist if we can't make money from advertising? People are obviously not going to just switch to buying subscriptions (even though it would be nice if they did).

Granted, the paid-for trend is growing too. Crowdsourcing, backing creators via sites like Patreon, and all the many new venues that are created based on some type relationship through subscriptions or memberships all growing.

This trend is absolutely amazing, and in Adobe's and PageFair's report on ad-blockers, 20% said they were willing to pay in exchange for an ad-free experience. This is a high number considering the massive abundance of content we have online.

Note: the real question here is, how do you define 'your favorite website'? ... and with that I mean, how many people are willing to pay for the less favored sites? Hint: The answer to that is zero.

Yes, the paid-for media trend is going up nicely, and for individual media publishers, bloggers, artists, creators, niche channels and networks. Subscription type offerings are looking extremely positive.

Of course, to make this work you have to do much more than just ask people for money. The difference in intent between a person coming by a site randomly, and someone subscribing to one is like night and day. You simply cannot take an advertising based site and turn that into a subscription based site without also completely changing what you do, how you do it, the people who do it, and the reputation of those people.

Advertising based sites are monetized mostly by people who 'just happens to stop by', while subscription based sites are monetized by people who choose to stop by so often that they have decided to become a member and establish a long relationship.

That is a huge difference from an editorial and business perspective. Think about how massively different the underlying consumption patterns and reader behaviors are between those two scenarios.

So, yes. The paid-for trend is one solution, and a very exciting one. But only for very specific forms of media. It is never going to replace the world of advertising ...but, nor does it need to.

Ad-blockers are a distraction

One thing that many people forget to consider when discussing ad-blockers is that they are not that important. Ad-blockers represent the symptoms caused by a disease, but they are not the cause of the disease itself, nor is the disease that scary.

Let me explain.

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Thomas Baekdal

Founder, media analyst, author, and publisher. Follow on Twitter

"Thomas Baekdal is one of Scandinavia's most sought-after experts in the digitization of media companies. He has made ​​himself known for his analysis of how digitization has changed the way we consume media."
Swedish business magazine, Resumé


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