Ad blocking: How Facebook’s model will save the digital advertising industry

By May 16, 2016 Facebook No Comments

Looking back at online advertising’s sharp rise to world domination, it’s no surprise that the digital audience is fed up. We took the interruptive advertising model – slapping an ad in the middle of content – that we use on radio, television and newspapers, and brought it online.  By 2015 the global digital advertising spend was S$11 billion and is continuing to grow 16% year-on-year. We grew it and grew it and grew it until it became a monster.

With all the visual clutter, auto-play videos, and non-stop pre-roll, the IAB UK reports that we’re losing S$16 billion a year globally to ad blocking. So clearly we’ve exploited this opportunity a little too much. The online audience has grown up, they know we have their data, so why are we still sending them irrelevant, interruptive ads? We need to create better canvases for our consumers, and turn ads into rich data-driven content that’s a part of their news feeds.

A life without ads

To get out of this hot mess, let’s look at how we got into it. The amount of information and tools we have at our fingertips today: Wikipedia, Google products, millions of apps, the iPhone, the hundreds of billions of websites,  and the ability to take that data and travel around the world with it is incredible.

All this would not have happened without ads. As of 2015, Google’s total advertising revenue alone is S$93 billion, 89 percent of which is made up of interruptive advertising.

Imagine if you had to pay for Facebook. Ad Age did some math and Facebook’s total advertising revenue is S$5 billion and there are 1.5 billion people on Facebook. If everybody had to pay for Facebook, it would cost $10.50 for access. It doesn’t seem like a lot until you realise that 4.5 million of the users are from the developing world. On top of that, if it was charged from beginning, it would never have existed.

Facebook and Alibaba are completely driven by advertising, and whilst Uber and Airbnb are not, in my opinion, those companies would never have existed without the potential of the internet advertising industry.

The end of good journalism

The publishing industry runs on advertising too, and ad blocking is ruining it. How else will we get all the good quality content? Ad blocking will cost us billions next year, that’s a massive chunk of money that publishers are not going to have access to.

Wired Magazine delivers really good tech news, but they’ve realised people coming to their website are starting to block ads. So Wired tracked users who use ad blockers, so when someone visits Wired, they are instantly block them from the website with a note that says, “You no longer have access to this content. If you want additional content, you’re going to have to pay for it.” How do we think the users are going to respond to that?

Facebook paves the way

Going freemium was the first compromise that the industry took to say, “Alright, these ads are pretty annoying. So if you want to get rid of them, give us money.” I don’t think this really has any scale. It might work for utility products, but for publishers, it’s an admission that their advertising model is not very good.

The day Facebook removed advertising from their left margin and made advertising a part of the newsfeed, was the day we saw how the future of online advertising should look. Ads should be actually part of the content, not instead of the content. It’s from advertising, it’s from brands that you have already liked and you have already sponsored.

Mass media is dead. The most successful, interruptive advertising media of all time is television — and television is dead.  We’re still pedalling an ad format which actually television invented in the 60’s and is not relevant with the amount of data we have today.

What the future holds

The online advertising industry is going to continue to grow because of a seismic change right now. The future of video consumption is online, it’s programmatic, it’s on demand. Using publisher’s data that’s been collected, every single ad should be relevant to the content it’s delivered in.

Mobile and social media is the new mass media and will continue to dominate the next few years, while traditional advertising and desktop consumption will decline. Data-driven native advertising will offer richer and more relevant content that people actually want to see. To facilitate this, tools for everyday life will be increasingly powered by mobile cloud computing.

The offline industry will continue to grow as well. We believe in a future where online advertising will be able to sequentially fill offline needs. Whether someone is trying to find a taxi in Boat Quay, or get groceries at Fair Price, advertising can assist, not interrupt. This is a world that we’re going to move into, and we’re going through that change right now.

What are your thoughts on Ad blocking? I’d love to hear it.

Follow me on Twitter @SuttonMatt.

Matt Sutton

About Matt Sutton

CEO - AdParlor Asia

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