Publishers are in peril from annoying ads

There is nothing so inspiring as a person triumphing over disaster — the narrative of many books and films. So the sight of Henry Blodget, the former Wall Street analyst who was disgraced in the 1990s dotcom bubble, selling Business Insider, the news site he founded in 2007, at a valuation of $390m is heartwarming.

Even more remarkably, Mr Blodget has achieved the equivalent of swimming through shark-infested seas by luring millions of readers with brash headlines about market movements (and quite a lot of sober stuff) while funding his enterprise with advertising. He has floated on the choppy, murky waters of online commerce.


The deal shows not only Mr Blodget’s endurance and ingenuity but also the size of the challenge. Axel Springer, the German publisher, is buying a website with 76m monthly users and projected revenues this year of $43m — which amounts to 57 cents per user per year, or 5 cents a month; a modest haul. There are no profits, although they are anticipated in 2018.

These revenues are a fraction of subscription-based businesses such as Netflix, which charges US users $8.99 per month — and Mr Blodget hopes to triple revenues from his own subscription research service by 2018. But it is not his fault that the return from online advertising is so meagre or that the yields are so tiny. Online ads have not delivered the financial rewards that many publishers once expected.

Now they face a revolt by users who are tired of screens being occupied by flashing banners and video ads that play without warning, of personal information being harvested in unknown ways for ad targeting, and of download speeds being sapped by bulky software. About 200m people already use adblocking extensions on their browsers, both for desktops and mobiles.

Ad blocking put paid to $22bn in potential revenue last year, according to one study, and Apple has added to the challenge by approving adblocking applications for its mobile browser. This has provoked complaints from publishers that users are breaking an unwritten contract — they receive free news and information in return for being served ads — and that blocking is unethical.

As someone whose salary is partly met by digital advertising, I do not agree. There is also an unwritten contract between publishers and their readers not to allow advertisers to litter sites with time-wasting and annoying messages. Too many publishers, eager for revenue, have breached it.

This has caused a vicious cycle. Publishers have placed ever more slots for ads on their pages — some in places that consumers are unlikely even to see them — and allowed them to be filled through ad exchanges with limited control over who uses them and how the ads operate. Business Insider gains 30 per cent of its advertising revenues from “programmatic” ad placement.

Even some in the advertising industry express sympathy. “A number of publishers have been so anxious to take every cent from anyone that they have abused the consumer’s trust,” says Rob Norman, chief digital officer of GroupM, the world’s biggest media buying agency. “I see why people use blockers. You would, wouldn’t you?”

Mr Norman’s sympathy does not extend to letting ad blocking continue unabated. He would like Google, one of the biggest beneficiaries of digital advertising, to wield the “big stick” — retaliate against the young, male, technically sophisticated users who disproportionately use ad-blockers by blocking them from seeing YouTube videos and hitting them where it hurts.

But not even Google has the power to change the world by itself. It requires concerted action by publishers to say what kind of adverts they will allow on their sites — standards which can then be approved as legitimate by both advertisers and consumers.

Ad-blocking companies seized the chance, defining what they regard as “acceptable ads” — the kind they will set software not to block. In some cases, they have taken payments from large publishers and ad brokers. Eyeo, which sells the popular Adblock Plus software, then “white-lists” their ads.

This has two problems. One is that standards are influenced by a subset of users with a pronounced antipathy to commerce. A survey of Adblock Plus users found that 21 per cent would not even accept “unobtrusive ads”, while more than half partly or completely agreed that all content should be published free and without ads.

Second, asking for money to unblock ads bears a nasty resemblance to extortion. Eyeo insists that no publisher can buy approval and everyone has to meet the same standard, but it has undermined its own claim to be acting responsibly. It now intends to appoint an independent review board to make these decisions instead.

Publishers, which have a long-term interest in not alienating users, need to impose tighter rules for advertisers themselves. If they do not, the tensions will descend into warfare among advertisers, consumers, ad blockers, and software companies that nullify ad blocking, such as PageFair.

Mr Blodget has navigated his way through testing challenges already, and will remain at Business Insider under its new owner. Perhaps he could offer moral leadership.


John Gapper


Fonte: FT