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Ad blocking has become a significant issue for content publishers, particularly in the last 12 months. Consumers using ad-blocking software are accessing content without generating revenue for publishers because advertisers only pay for adverts that have been served to the user. The result is that users of ad-blocking software are effectively browsing content for free and the impact of this is significant.

For the first time, Ovum has forecast that if publishers do not adequately respond to the threat posed by ad-blocking software then, in the worst-case scenario, the industry could see lost revenue of up to $78.2bn – or 26% of total Internet advertising – by 2020. However, it is much more likely that publishers and advertisers will respond and stem the losses at around $35.3bn.

For this more likely scenario to play out, we have assumed that mobile advertising will remain a relative safe haven, despite recent data that suggests the use of ad blockers on mobile devices is higher than expected. Both Apple and Google, for instance, have forbidden apps that block in-app advertising. With consumers spending more time using apps than using browsers, publishers with a strong mobile presence will be able to minimize losses.

We also assume that carrier-level ad blocking will remain niche. A number of telcos have begun or have plans to deploy software to enable ad blocking at a carrier level. In June 2016, Three UK will conduct an ad-blocking test across its network, allowing people to opt in to remove ads whenever they use their devices. Digicel, a carrier that operates mostly in the Caribbean, has started offering a similar service.

Ovum expects adoption for an opt-in service to be small because the more barriers to adoption there are, the less likely it is for consumers to adopt. Switching on carrier-level ad blocking is likely to require more input than downloading an app or a browser add-in, both of which can be done easily even by nontechnical consumers, whereas carrier initiatives often require consumers to log in to an online account or to make a phone call. Consumers spend more time browsing over Wi-Fi than mobile Internet; therefore, even if they do use carrier-level ad blocking, they will still see adverts on their device most of the time.

Such software may also end up conflicting with net neutrality rules. However, an opt-in service rather than an opt-out service may be enough to make network-level ad blocking compatible with the net neutrality rules. Strict pro net neutrality legislation requires all data, including intrusive ads, to be treated equally. However, most net neutrality rules in place are sufficiently vague and untested for anyone to be certain of the legal standing until an operator makes the service available.

To fully address the issue and prevent consumers from turning to ad-blocking technology, publishers need to work with advertisers to improve consumer experience. Ad blocking is largely a consumer response to advertising that is perceived to be intrusive or that consumers see as ruining their experience. Therefore, publishers must respond to this to restrict losses.

Straight Talk is a weekly briefing from the desk of the Chief Research Officer. To receive this newsletter by email, please contact us.

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