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Ad blockers: A solution or a problem?

Robert L. Mitchell | Jan. 16, 2014
It's a cause. It's a curse. It's just business. Ad blockers take a bite out of the $20 billion digital advertising pie.

The business of blocking

Ad blocking has become a business opportunity, and the publishers and advertising networks publishers aren't happy about it. "You have a third party disrupting a business transaction. They are throwing a monkey wrench into the economic engine that's driving the growth of the Internet," the IAB's Zaneis says.

Ad blocker vendors are pursuing a range of different business models, some of which have attracted money from angel investors and venture capital firms that hope to profit as the adoption of the tools continues to expand.

The most controversial business model, put forward by Adblock Plus, offers to help publishers recapture ad impressions lost to its product by signing on to its Acceptable Ads program. To qualify, a publisher's ads must meet Adblock Plus' conditions for non-intrusiveness and pass a review by the open-source community before being approved. Adblock Plus then adds the site to its whitelist. Ads on whitelisted sites pass through Adblock Plus's filters by default (although users can still change the settings to ignore the whitelist).

The catch? Adblock Plus charges large publishers an undisclosed fee to restore their blocked ads.

Faida declined to disclose how his firm determines who pays or the fee structure, other than to say that it varies with the company's size and the work required to include the publisher's ads in its whitelists. Tim Schumacher, the founder of domain marketplace Sedo and Adblock Plus' biggest investor, says some companies have been asked to pay flat fees, while other contracts have been "performance-based" -- that is, linked to the volume of recaptured ad impressions and associated advertising revenue. Currently, 148 publishers participate in the Acceptable Ads program; 90% of participants in the program aren't charged at all, Schumacher says.

And getting into the Acceptable Ads program isn't easy. According to Adblock Plus, it rejected 50% of 777 whitelist applicants because of unacceptable ads; the overall acceptance rate stands at just 9.5%.

Adblock Plus has stuck a deal with at least one marquee customer -- Google signed on as a paying customer in June 2013. The deal covers its search ads as well as sponsored search results on Google and its AdSense for Search partner sites.

Since those search ads are mostly text-based, qualifying for the program was less difficult than for publishers that rely on display advertising. The deal ensures that Google's search ads will appear on affiliate sites even when other ad content is blocked. A Google spokesperson declined to discuss the terms of the deal or whether it was "performance-based," but the potential upside for Google may have made the deal a no-brainer. Last year the company earned $31 billion just on ads published on its own websites. If Google were to recapture even 1% of that amount from ads blocked by Adblock Plus, the deal would deliver a huge return on investment, according to Ido Yablonka, CEO of ClarityRay, a company that helps publishers deal with ad blockers.

 

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