Mobile Software - Blocking Ad Revenues

Many of the world’s largest Internet and mobile software companies, like Google and Facebook, rely heavily on advertising to finance their online empires. 

But that business model is increasingly coming under threat with one in five smartphone users, or almost 420 million people worldwide, blocking advertising when browsing the web on cellphones. That represents a 90 percent annual increase, according to a new report from PageFair, a start-up that helps to recoup some of this lost advertising revenue, and Priori Data, a company that tracks smartphone applications.

The use of ad-blocking software has divided the online world.  Supporters say it allows people to get better access to content without having to suffer through abrasive ads. Opponents, particularly companies that rely on advertising, say blocking ads violates the implicit contract that people agree to when viewing online material, much of which is paid for by digital advertising.

Mobile software ad blockers have become particularly widespread in emerging markets, where people are more reliant on their smartphones to use the Internet.  Already, 36 percent of the smartphone users in the Asia-Pacific region have so-called ad-blocking browsers on their mobile devices, allowing them to remove online ads when they use the Internet. In India and Indonesia - two of the world’s fastest-growing Internet markets - that figure is almost two-thirds of smartphone users, according to the report.

Most of the data on the mobile homepages of the top 50 news websites comes from advertising, explaining the appeal of ad blockers.  While mobile ad blocking is mostly an emerging market phenomenon now, it is costing the global advertising industry billions of dollars a year in lost revenue. Roughly 200 million people also have ad-blocking on their desktop computers, PageFair estimates.

For example only 4.3 million Americans, or 2.2 percent of smartphone owners, used ad blockers - through browsers or other services - on their smartphones as of March. By comparison, 159 million people in China have installed ad-blocking software on their cellphones, the report said. But as people in Western markets increasingly rely on smartphones to reach the Internet, the use of mobile ad blocking is expected to rise.

This month, Three UK, will conduct an ad blocking test across its network, allowing people to opt in to remove ads whenever they use their mobile phones. Digicel, a carrier that operates mostly in the Caribbean, has started offering a similar service.

Analysts say such efforts may breach so-called net neutrality rules, which require all online data, including intrusive ads, to be treated equally. Legal experts, though, say the use of ad blocking has yet to be challenged in courts over whether it meets net neutrality standards.

Despite this legal uncertainty, people’s interest in blocking ads, particularly on their cellphones, is unlikely to wane.  “It’s already used by hundreds of millions of people,” a representative of PageFair said. “You can’t put the cat back in the bag.”

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