Thursday, October 8, 2015

Ad-blocking -- Kicking and Screaming to Win-Win Value Propositions

Media companies are in a panic over ad-blocking, as an existential threat, now that Apple has enabled it for mobile -- but this may just force the end of an era of consumer abuse deservedly left behind, and the beginning of a new era of win-win value propositions. Advertising strategies have become increasingly consumer-hostile, and that has caused consumers to say "I'm as mad as hell and I'm not going to take this anymore." While this may seem the end-of-days for publishers, we may just be turning a corner toward a much more effective blend of advertising and subscription models. What we need is a new and more collaborative, win-win mind-set.

Things have long been in a downward spiral, as publishers are squeezed at both ends -- lack of subscriber revenue and decreased ad effectiveness.  Even though we have entered an age of personalization and targeting, desperate publishers overload users with a poorly targeted barrage of ads, and fed-up users choose to block them. That it is nicely illustrated in this diagram:

Jason Kint graphic

Apple's enabling of ad-blocking in Safari may be the coup de grace for current models. The recent PageFair/Adobe Ad Blocking Report shows how this has been growing over 40% per year for several years, to a loss of tens of billions of dollars, even before the new Apple support gives ad-blocking increased legitimacy.

As my friend Bill Rosenblatt observed on Forbes, to publishers, ad-blocking looms much like piracy. Publishers have relied on ads to pay the freight, so consumers could buy their content at low rates. Some sites even have terms of service that make the contract explicit -- you agree to view our ads in exchange for access to our content. As with piracy, legal counters to prohibit ad-blocking are being sought by some. Bill referred to Digital Content Next (DCN, formerly the Online Publishers Association) as taking a more nuanced and consumer-friendly view, and a few days later, the CEO of DCN co-authored an interestingly balanced opinion piece on re/code (which contained the diagram above).

The underlying problem is that the advertising value proposition has been a bad one, shoved down the throats of consumers. Publishers decide what the ad burden should be, with little regard to the consumer's view of the value proposition. They set the prices and the ad loads, and seem to care little about how oppressive and obnoxious the ads are. (In an extreme case, a page on Boston.com reportedly took 8 seconds to load editorial, and 30 seconds for ads! -- who wouldn't want to block that?) They tell the consumers to take it or leave it. Contempt for the customer seems to have reached the breaking point:
  • Given no reasonable say in a value proposition they loathe, consumers react with subversion -- blocking ads, just as they react with piracy when they think content prices are rapaciously high. Consumers demand fairness from their suppliers, and if they feel it is not granted, they will seek to take what they feel they deserve by whatever means necessary -- a Robin Hood strategy.
  • And why not? Do they get relevant ads? Do they get to choose how to balance subscription fees and ad load? Publisher have declined to give them any choice, but now the ad-blockers do. The whitelist features of ad-blockers provide new power to consumers to pick and choose their value propositions, whether publishers like it or not. A site with a reasonable ad load may get whitelisted, while one with a heavy hand gets blocked.  
Publishers, why haven't you given your users some say in how to set the balance? Instead you forced them to do it for themselves, with their ad-blockers -- how is that working for you? Now ad-blockers may be just the thing that will force publishers to add some form of "reverse meter" that lets users get credit for their ad viewing, and to decide what mix of ads and fees they prefer. The DCN is advocating moves in this direction, and PageFair is providing tools to publishers to facilitate that. As noted in another DCN piece:
...ad blocking is endemic only because online advertising has become so invasive that hundreds of millions of people are willing to take matters into their own hands. To sustainably solve ad blocking, we must treat these users with respect, not force feed them the popovers, interstitials and video ads that they are trying to get rid of.
Sites which sign up for PageFair are given an analytics system precisely aimed at determining how many visitors are blocking ads, as well as a supplemental advertising system that displays adverts to adblockers only. The idea is that websites use those supplemental ads to ask visitors to turn off ad blocking software, appealing to their better nature and laying out the economic difficulty with operating in an environment where ad blocking is commonplace.
The trend seems to clearly require that publishers reconsider their value propositions, and make them more transparent, personalized, and win-win.

Any move in that direction will bring publishers closer to still more advanced models like FairPay, which apply adaptive processes to find personalized, win-win value propositions. Instead of arbitrary fixed prices for all you can eat (regardless of whether you eat a lot or a little in any given period), FairPay seeks prices that dynamically adapt to individual, time-varying usage patterns -- and the widely varying value-in-context that is received by each consumer at each point in time. Such prices are based on a new kind of value metering that acts as a flexible guide, not an oppressive sledgehammer. And it is a value meter that runs in both directions -- charges for value received, and credits for value given (such as in the form of ad viewing, personal data that can be sold, viral promotion, user-generated content, etc.). All of this is based on a win-win balance of powers. The Internet has leveled the playing field, and the sooner suppliers recognize that, the better for all of us. More about how this can work is in my recent post Patron-izing Journalism -- Beyond Paywalls, Meters, and Membership.

To the extent that publishers make ads more targeted, relevant, and useful, they will make money on ads.To the extent they fail, subscriber fees will be their only option. Either way, adaptive models like FairPay that offer truly win-win value propositions tailored to each user promise to be the most efficient model for doing both. Why shouldn't the consumers have a say in how many ads they view? -- as long as they pay a fair price, whether that be in money or in attention.


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