Ad-blocking software is to the advertising based Internet what Tivo was supposedly to broadcast television: with a little investment, users can consume content without the ads. As Simon Anderson and I pointed out some years ago in a paper published in the American Economic Journal: Microeconomics, since ads are annoying, users will have an incentive to use technology to block them. So long as there is some cost to installing that technology, it is not clear all ad supported media will be wiped out, because some consumers won’t install the technology and for them, if there is capacity, you will be able to get away with showing them more ads. Nonetheless, content providers would prefer that the ad-blocking technology did not exist.
In the Columbia Journalism Review, Michael Rosenwald brings all this up again with specific mention for ad-blocking browser plug-ins. Interestingly, the providers of these plug-ins aren’t simply all about blocking ads.
In many ways, Adblock Plus has become the internet’s advertising sheriff. That’s because its software, by default, allows some ads through its firewall—ads it deems “acceptable,” meeting a series of strict criteria it came up with in conversation with internet users around the world. The criteria essentially eliminate most of the ads on the market today, rolling back ad technology to the 1990s: text only, no animations, no popovers, no placement in the flow of text. In the two months since I’ve installed the software, I don’t recall seeing any ads that meet the criteria.
Websites must apply to get “whitelisted,” and an Adblock Plus employee then works with the site to make sure that the selected ads comply with the criteria. Ben Williams, a spokesman for Eyeo, told me that 700 publishers and bloggers have been whitelisted. The whitelist is how the company makes money. Eyeo charges large for-profit publishers a cut of ad revenues to be on the list, a scheme some critics have called extortion. Williams declined to say who is paying or how much, but the Financial Times recently reported that Google, Microsoft, and Amazon were among those paying Eyeo for their acceptable ads to appear to Adblock Plus users.
Now isn’t that interesting, if not, entirely predictable? You role out the blocking software for free to users and then you ask advertisers to pay to unblock it. Now, of course, this is to do so in a less annoying fashion but it doesn’t look pretty from the intermediation stand-point. Nonetheless, if it works, I guess there is an editorial service being done but one suspects that it is just as easy to provide a plugin that blocks even more so I wonder if competition would give rise to a race to the bottom and a full blocking equilibrium.
The premise for this type of market is interesting. The notion is that content providers don’t want to lose user ad-views. Given they are paid for them, that makes sense. But there is also a quality issue. Consider this. Who is most likely to take the time to install ad-blocking software? The answer is a combination of those who are really annoyed by ads and those who look at alot of content. If someone is going to be annoyed by ads, advertisers probably don’t want to put ads in front of them, let alone pay for them. If people look at lots of content, chances are they see too many ads from the one advertiser. So there is an argument here that ad-blocking software, so long as it isn’t everywhere by default and is costly for consumers to put in place, may actually play an important screening role. Its availability allows those who are the least attractive users to advertisers, to opt out. Who remains are ‘higher quality’ users in terms of advertising. So once we take into account the differences between users, at least in theory, it may mean that advertising rates for those who remain could actually rise!
Of course, the same sort of sorting could be achieved if users were to pay the website not to serve up ads. In that situation, you could have the screening along with some revenue as well. The point here, however, is that it is far from clear that you want all users to see ads all of the time. Some rationing and screening can be good.
This all depends, however, on ads either not being too annoying or ad-blocking software still being costly to some degree. I don’t have much to say about the latter but there is evidence that ads on websites are becoming very annoying. Here is Marco Arment:
But in the last few years, possibly due to the dominance of low-quality ad networks and the increased share of mobile browsing (which is far less lucrative for ads, and more sensitive to ad intrusiveness, than PC browsing), web ad quality and tolerability have plummeted, and annoyance, abuse, misdirection, and tracking have skyrocketed….
Modern web ads and trackers are far over the line for many people today, and they’ve finally crossed the line for me, too. Just as when pop-ups crossed the line fifteen years ago, technical countermeasures are warranted.
Basically, the code running ads is really slowing down websites — especially on mobile devices. In other words, not only are the ads annoying, their mere presence makes everything else run worse. That is double-annoying and may drive blocking software installations up. I installed the plugin, Ghostery, to see what the fuss is about and it is frightening. On CNN, for instance, there are about 30 different trackers that load with every page. Block them and the page loads instantly. No wonder all this greater speed in broadband doesn’t show up with a zippier experience.
I think it is this level of brokenness rather than the existence of ad blocking software that is the true threat to existing content providers. In this situation, it is no wonder that people are reading their news on Facebook where the experience can be controlled a little more. When this transitions to mobile — when ad-blockers become available there — something will likely have to give.
Digitopoly 
Here are some of my thoughts on this:
1) Machine learning and/or other AI already is able to identify faces better than humans, at least in some applications. So, it won’t be hard to get programs that can identify ads very accurately. And once the program can identify an ad, it shouldn’t be that hard to delete the ad, or put a white curtain over it, or some other decorative curtain over it. In fact, Readability already pretty much does this (although the program has its flaws and limitations).
So you could see in the next 10 years, if not much sooner, very good programs to delete all the ads from every webpage we go to.
So, what does this mean? So many media outlets barely survive as is. As I wrote in a post in 2014:
“The New Yorker’s John Cassidy talks about how keeping Ezra Klein might not have made sense profit-wise for the Washington Post. He does some back of the envelope calculations to estimate the revenues from Wonkblog:
“That translates into revenues of a hundred thousand dollars per month, or $1.2 million a year.”
Many of these Wall Street Guys make that in less than a day. This shows you the incredible positive externalities of good journalism, and negative externalities of much of finance.”
At: http://richardhserlin.blogspot.com/2014/01/wonkbook-and-wall-street-awesome.html
These media outlets would have to paywall, or “open source”, surviving on free labor and donations like Wikipedia.
2) But! If really smart programs can identify and eliminate ads, then we can also have smart programs that can identify the use of an ad eliminator, and stop you from getting the content if you’re using one, and put you on a black list. This would mean an era of choice: You could either accept the ads, or pay extra for an ad-free version. This is like Pandora.
But, also, of course, when it comes to media there are enormous market problems, some monumental, like the positive externalities of good serious investigative, analytical, and explanatory journalism, which of course should be highly subsidized (smartly). There’s also enormous asymmetric information, behavioral problems, monopoly power, and more, so of course you have a strong government role in all of this.
Of course, try telling this to our major party that’s not only anti-science, but just anti thinking beyond simple minded soundbites of ideology. Nonetheless, when their power to block can be defeated, there should be a lot of regulation stopping clearly societally harmful advertiser behavior. And, we have had this to a large extent in the past, like government limitations on the amount of TV commercials per half hour, and what TV advertisers can do.
Don’t you think ads on the Internet are terrible ugly? Basically every page out there is infested with ugly random irrelevant ads. On the old days you had magazines and television with selected (and expensive) ads from big companies.
Now it’s a mess of “everybody” trying to get people’s attention on pages with ads popping, alerts, “please don’t leave this page”, paragraph breaks with ads, ads that make you confuse the text with advertising, clickbaits, spam ads, virus ads that somehow get into important sites, blinky ads, app ads… The list goes on.
The Atlantic posted a plea to turn off my Adblock. Being sympathetic, I did, but what happened? A deluge of all the obnoxious ad behavior that Adblock is designed to eliminate. So, i turned it back on, and told The Atlantic why.