Ad_Blocking_Kohl (1)

Ad blocking and the commerce-content revolution


Disruption in business is great, except when its your business thats being disrupted.

Apples decision to allow ad-blocking apps in their iOS9 release raises that possibility for everyone in every business, in e-commerce and beyond. The best-case scenario is a blip of consumer interest that has no real effect on business as usual. The doomsday scenario is that ad-blocking goes mainstream, which would change the very nature of the Internet as we know it. As frightening as that sounds, for the most forward-thinking brands, this could be a very exciting thing indeed.

To some extent, weve all seen this coming, and as consumers, weve certainly experienced the downside of digital advertising. The over-abundance of ads on any given site is an annoyance. Thats why weve collectively become banner blind, and according to an April 2015 Smart Insights report, the click-through rate across all ad formats has fallen to a paltry .06%, or less than 1 click per 1000 impressions.

And remarketing ads, which at scale do deliver ROI for merchants, can come perilously close to virtual stalking. So, some form of consumer pushback is/was inevitable. Now that the ad-blocking genie is out of the bottle, it will be interesting to see how far this goes.

Consumer and B2B brands of all kinds have embraced digital advertising, almost as quickly as people and businesses have shifted their shopping habits online. 2015 digital ad spend is estimated at $58.6 billion. Of that, retailers contribute 22%, or $12.9 billion, according to eMarketer. This spending, in the form of text ads, display ads, banners, pop-ups, pop-overs, video, native advertising, remarketing, etc., are the lifeblood of the Internet. In fact, 90% of all Internet revenue comes directly from advertising. Take away some or all of that money and we will begin to move from a free (ad supported) internet to a gated (fee supported) internet.

Why would Apple want to bite the hand that feeds the Internet? In a word: Google. Apple has its iAd platform, but the company derives a relatively small portion of its revenue through advertising. Google, on the other hand, generates the vast majority of its revenue that way. Cut off that stream and Apple directly hurts a main competitor, while, in theory, giving Apple users a cleaner, faster digital experience. (Its funny that iOS ad blocking doesnt extend to their newly launched Apple News app.)

So, what would a gated internet look like? Publishers of news, information, and lifestyle sites would be forced to charge for access or find other ways to monetize their content. This could perhaps take the form of publishers banding together to offer a pool of subscription content for a fixed fee.

However, to date, Internet users have shown reluctance to paying for any content other than streaming video, e.g. Netflix. If ad blocking even reaches a relatively small 10% adoption rate, the fallout could be catastrophic. Thousands of media sites would be affected, with many forced to shut down. This would create a huge void for an insatiable, information-hungry public. And this in turn could create a huge opportunity for B2B and consumer brands.

All brands are already publishers. Some are currently much better at this than others. However, every brand will need to get better, regardless of how the ad-blocking scenario plays out. Fortunately, most have the fiscal means to improve their storytelling. Building the proper teams and processes will be the bigger challenge

Billions are being spent on somewhat inefficient digital channels. A 2014 Wall Street Journal report indicated that 36% of all web traffic is generated by click-fraud programs, meaning more than a third of all ad spending is being siphoned off by bots and other fraudulent schemes. Reallocating even a small fraction of this spend toward creating exceptional content would have far-reaching impacts.

Many brands are already using high-quality editorial content to drive customer engagement. The need could be to take this a step further. This may extend to reporting on topical, industry-related news to serve as a primary information source, as well as producing immersive lifestyle content. While the idea of brands creating in-house newsrooms may sound like a stretch, image the influence that a brand could wield if it became the go-to source of information for people in their target audience.

Those that succeed will establish deeper customer trust. Theyll drive more visits to their sites more often, creating additional conversion opportunities through digital and physical channels. This will help grow revenue, which in turn can be invested in creating even better content. Its a potentially self-sustaining cycle that will pay for itself in the long run.

Ad blocking may simply be the impetus that pushes all of us in the right direction more quickly.

Randy Kohl
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January 12, 2016
Randy Kohl

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