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Ad blockers: A solution or a problem?

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.

January 15, 2014 06:30 AM ET

Computerworld - For Mauricio Freitas, publisher of the New Zealand Geekzone website for mobile enthusiasts, ad blocking software has been a major headache. Last year his site lost more than one quarter of its display ad impressions because of visitors running these increasingly popular -- and free -- browser add-ons that filter out advertising before users ever see it. "We serve about two million page views a month. The impact on our revenues has been significant," he says.

Viewing ads is part of the deal if users want content to be free, says Freitas. The use of ad blocking software breaks that implicit contract. What's more, he continues, the vast majority of visitors who use ad blockers aren't interested in making even a small payment in exchange for an ad-free site. Only 1,000 of Geekzone's 350,000 unique monthly visitors have been willing to pay $25 a year for an ad-free option, even when Freitas has thrown in other perks.

And some believe that today's ads aren't as obnoxious as yesterday's. "We all hate the dancing monkey and display ads that blink at us," says Mike Zaneis, senior vice president at the Interactive Advertising Bureau (IAB), a trade group that represents publishers and ad sellers. "Do you see larger ads, or sponsored ads today that take over the entire page for three seconds? Absolutely. But they're not the spammy, irrelevant messages that most of us think of from five years ago." The problem for publishers, he says, is that most ad blockers don't just block annoying or intrusive ads -- they block everything.

How ad-blockers work

Ad blockers are content filters that rely on predefined filter lists to identify and remove ads. They work by compiling lists of expressions associated with ads and using pattern matching to compare those against outgoing requests made by the user's browser.

Ad blockers may also block tracking scripts, which in turn prevent third-party ad networks from delivering ads to a user's browser by way of the publisher's site. "Before the page is rendered, Adblock Plus modifies it, strips off the request to the ad service or tracking scripts and injects CSS to repair the site so it doesn't look broken," says Till Faida, president of Adblock Plus.

Think of it as surgically removing the ads and then closing up the holes. To the user there's no evidence an ad ever existed.

Because they interrupt communications with third-party ad networks, dedicated tracking blockers such as Disconnect also block ads from those sources. Disconnect does so by examining the host name for any outgoing browser request and blocking requests to hosts associated with ad networks that track users' activity across the Web. But the intent is to block tracking, not ads, says co-CEO Casey Oppenheim, and these tools still let through "first-party" ads produced by the publisher.

On the other hand, there are publishers who agree that users of ad blockers have a point about obnoxious ads. "We are all frustrated and upset when we go to a quality publication and see ads for flat belly diets or pop-under ads," says Erik Martin, general manager at Reddit, which uses a limited amount of display advertising.

He thinks that people are being pushed into wanting to use ad-blockers. "There's a whole generation that doesn't even see most of the ads on the Internet, and the industry has put its head in the sand about dealing with it."

In fact, Till Faida and other distributors of ad-blocking software see their mission as a cause. Faida, president of Adblock Plus, the best-known ad blocking software -- the business claims to have 60 million users worldwide -- says ad blockers empower users to combat a rising tide of intrusive and annoying ads. "People should have the freedom to block what they don't like," he says.

But ad blocking is more than just a cause. It's a business, a rapidly growing one that's taking a bite out of the multi-billion dollar market for online search and display advertising.

Billion-dollar blockers

The stakes for publishers (including the publisher of this site, IDG) and advertisers are high. In the first half of 2013, advertisers spent $20.1 billion on Internet advertising in the U.S., including $6.1 billion on display advertising, according to the IAB's Internet Advertising Revenue Report (PDF). Adblock Plus claims that about 6% of all Web surfers in the U.S. run its open-source software, mostly in the form of Google Chrome and Firefox browser add-ons and extensions.

Currently, publishers that cater to a technically savvy audience, such as gaming sites, seem to be getting hit the hardest. Niero Gonzalez, CEO of gaming community Destructoid, is seeing a block rate between 36% and 42%. "Ad blocking hurts the small enthusiast sites the most," he says, and adds that he's not sure the old revenue model based on display ads will ever recover.

Gonzales has conducted an ongoing dialog with his customers since discovering the problem last March, and says that, in general, visitors to his site tend to fall into one of three camps: "One says advertising is evil, another says I don't want to do [ad blocking] so give me an option, and the others just don't care." When he presented an option for an ad-free experience, less than 1% of his 4 million unique monthly visitors signed up for the $2.99/month subscription.

And as the number of ad-blocking software downloads continues to climb, even sites that serve a less technical audience are starting to feel the effects. Most publishers don't want to speak on the record for fear of alienating their customers, but a recently departed executive with one publisher in Alexa Internet Inc.'s ranking of the top 100 listing of global websites says that between 4% and 8% of the business' traffic -- its sites generate over one billion page views per month -- is being blocked. "It's a ton of money," with lost revenues in the millions of dollars, he says.

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