Is The Ad-Free Experience Only For The 1%?

jayfriedmannewData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Jay Friedman, COO at Goodway Group.

Will the ad-free experience of the future only be available to consumers who pay enough to prevent the ads from being shown?

The table is certainly set. For $30 per month, you can get Netflix, Amazon Prime and Hulu, all while never seeing an ad. For a few more dollars a month, you can get all of your music from Pandora or Spotify ad-free.

And now there is talk about the paid web, where consumers can pay for ads either via micropayments or “all-you-can-eat” subscriptions for content. What starts at $9 per month for one video-streaming service can quickly become $30, while what begins as a couple of bucks online could easily turn into $50 or more per month. Imagine all the Yahoo you can consume per month for just $5. And ESPN. And Condé Nast. And News Corp. And Turner. And BuzzFeed. And AOL plus its O&O properties.

Not only would this be frustrating, it could get expensive pretty quickly. Add up these subscription costs across media and one begins to wonder: Is an ad-free experience across media only for the wealthy?

I see two root causes driving ad blocking. There are those who take publishers to task for taking advantage of consumers through excessive tag loading. As of this writing, Ghostery shows 55 tags loaded on Business Insider, 29 on Forbes after a forced full-screen takeover, 69 on MSNBC and 72 on DallasNews.com. The New York Times recently showed that consumers would be better off paying 5 cents to read an article than to consume so much data on their phone at a cost that is six times higher.

I believe the other driving factor is the need for some people to feel like they’re “beating the system.” Whether they think advertising is mind garbage or they just like to pull a fast one on the big, bad corporation, some folks get a thrill from ad blocking. I disagree with them, just as I disagree with someone hopping the turnstile and riding the train for free. Neither ad blocking nor jumping the turnstile is a “victimless crime,” and publishers should stand up to this, but not until they change the sheets on the bed they made, which prompted this mess in the first place.

So, where do we go from here and how does this play out? Several scenarios are vying for the win.

The Pay Model

Whether we’re too stubborn or unorganized as an advertising technology community, this scenario supposes we don’t unify in a way that enables us to get around ad blocking. Smaller sites might go out of business, while larger sites institute pay models.

I believe pay models will consist of two to three tiers, with the highest being unlimited consumption and sharing. Here’s the problem with this model. SiriusXM and cable TV already have shown that consumers will pay for content and tolerate ads. Most SiriusXM music is ad-free, but little of its talk programming is. And live sports have a strong hex on a large number of users around the world, so it’s easy to see how sponsorships will remain a part of such a dominant type of programming.

So even if this model does accelerate, I don’t believe it will be “pay to see no ads.” Investor pressure will let ads trickle back into the model, requiring consumers to bear the worst of both worlds. I give this model a 20% to 30% chance of winning.

Note: I do not believe micropayments – where consumers are charged by the page or article – are the future because it breaks too many rules of behavioral economics.

Ad Serving Recoded

The reason ad blockers work is that all of the ad and tracker calls loading on the page come from domains other than the one being visited by the user. But does it have to be this way?

How many things are we doing today in ad tech that we thought were impossible 10 years ago?

I’m not an engineer so I don’t know how this could technically work. But I’d give it a 30% chance someone is working on this right now, and a 20% to 30% chance this ends up being the way our ecosystem does business.

Note: It’s worth considering the cat-and-mouse game this might create. If ad-blocking companies perceive this to be a workaround, they may improve their abilities to block out some of these ads regardless of where they’re served from. Plus, consumers are fickle, happy to install three ad blockers and use the one that blocks the most that day. Surely this would not be a win for anyone.

Partial Ad Blocking

For all the hype about ad blockers, many forget that most consumers do not use ad blocking at all. But even if the top end of the ad-blocking usage curve is 50%, that’s still too many consumers not being monetized. Advertisers have money and publishers need to get paid, so money will flow.

If my first option around paywalls wins out, ad blockers could still play a part in that ecosystem. However, a more likely scenario – and one that is already starting to occur – is that ad-blocking companies whitelist certain advertisers and ad technologies. I go back to the two main reasons consumers use ad blocking. While I think most consumers don’t mind the ads, they simply don’t like the absurd load times and anything that feels “creepy.”

In a scary scenario, the ad blockers could end up being the server-to-server gate keepers, wiring together all third-party data companies, such as BlueKai or Exelate. Or ad blockers end up being the ad servers to whitelist their own domains. I think this scenario or something similar has a 40% to 60% chance of succeeding. After all, as much change as our industry has undergone, the consumer and publisher economy is still recognizable against the one we operated with 30 years ago.

All of this requires ad blocking to become prevalent enough that every major publisher must address it. We’re not there yet, but we’re certainly headed that way.

Follow Jay Friedman (@jaymfriedman) and AdExchanger (@adexchanger) on Twitter.

6 Comments

  1. Leave it to Jay to not sugar coat a thing. 🙂 Great article Jay, this prediction couldn't have come from anyone else. The scariest thing in play (and what you are saying is most likely) is that the ad servers control the white lists.... So you mean DCLK. If this reality takes place where Google controls the subscription to the Internet with "no ads" It would be interesting to see if Google actually does it. Google, Even if you had the ability to charge your users for no ads across the internet, would you do it? Does the Math work out?..... No? Not yet. Too risky to try because there's everything to lose.

    Probably not until someone else forces it on them and everyone else, by risking *nothing* to figure out the math, and the reward is owning the whitelist, would Google get involved. Everyone wants to know if the math will work out but I'm surprised, so very surprised there aren't more startups here, yet. (Other than SourcePoint.)

    From there, then it becomes an ISP game. With Comcast, Verizon and ATT managing the whitelist, the content and user audience ID and we're back to the old cable TV model, some ad free content bundled with ad loaded content.

    Reply
  2. Brienned

    The problem with pay models is that they don't account for the way we interface with web pages anymore. The BlockAdBlock blog has a good piece on this now, but the gist of it was that we increasingly enter websites at low-level pages, and never see the home-page. We also often visit sites just once, and flit off to another site after reading a paragraph or two. Since we no longer have relationships with most sites we visit, subscription models don't work.

    Reply
  3. Rodrigo Palacio

    A great, well-written and thought-provoking piece. An argument could be made that ad blocking arose as a response to websites that simply overwhelmed users with ads.

    In the case of Forbes, you can navigate to the site without being served an interstitial. If memory serves, some content on Forbes contains autoplay and auto-expand videos (if not Forbes, try Business Insider).

    I don't see the pay model gaining traction with the general public for the simple reason that, anything that a web browser renders can be manipulated on the client-side, e.g. Ghostery will notify me of which tags are being fired, I can block them in my browser. In the case of overlay ads - consider the classic example of an ad on top/partially blocking video content - the HTML that renders them can simply be deleted.

    As more and more advertising technologies are invented, new technologies to mitigate them are developed. AdBlock may have been bought out by some mysterious party, so the market switched to a different ad blocking provider - problem solved.

    Perhaps the 1% that surf ad-free are those that take the time to implement technologies to improve their user experiences. Publishers need to balance their desire to monetize with the user experience the impart on their audiences.

    Reply
  4. Hi Jay - great article, very thought-provoking. Thanks for sharing. Can you elaborate on why you think micropayments won't work?

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  5. By even remotely implying that blockings ads in a crime (not a victimless one) you lose all your credibility. There is no law against it. So not a crime. It is their choice to adapt. They can either make far less intrusive ads. OR do something to block me entirely. But if they choose not to do that, then I am not responsible for the loss of hteir money.

    Reply
  6. Richard Lack

    There's another 1% here, and it's part of the problem.

    Right now less than 1% of all the users on a typical publisher site can be bothered to register.

    The rest remain anonymous, and publisher sites are now awash with creepy 3rd party ad tech which attempts to infer targetting data. But it's a race to the bottom. Every year we see more ads per page, just to keep up. AdBlockers are a symptom of this, and advertisers are savvy enough to figure out that inferred targetting data can be pretty flaky.

    The best publishers have figured out a way to persuade users to register. The 1st party permission based data they get is good enough to increase CPM and click-thru at least 3x. A decent site can garner 15% registration rates, and often 45-50% of all ad impressions coming from registered users.

    So there's a 3rd way here. How about we politely ask users to identify themselves by registering, so we can serve them targeted ads? We could then dispose of most of the 3rd party ad tech on the page and make the web faster and less creepy. Yay!

    Reply

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