Is Network-Level Ad Blocking a Lose-Lose Situation?


On Friday (19 February) the mobile network operator (MNO) Three delivered the news that, in partnership with Shine Technologies, it would introduce network-level ad blocking to all customers in the UK and Italy. Cue gasps and shaking of heads across Europe – except from Shine Technologies and Three Mobile (investor-by-proxy of Shine Technologies through Li Ka-shing, owner of Three's parent company Hutchison-Whampoa).

This significant move by one of Europe's biggest MNOs left the industry asking many questions, but mostly: "Why do Three Mobile think that the best way to tackle ad blocking is to block all ads?"

Shine Technologies first made the news when a similar partnership with Digicel was announced in September 2015. Catchily referred to at the time as the 'ad-block-alypse', it saw network-level ad blocking rolled out to all Digicel customers across Jamaica, with other markets to follow. The primary purpose seemed to be a desire to encourage the likes of Google, Yahoo, and Facebook to enter into revenue share agreements.

Three also believe the ad network should bear the data charge costs for their customers to view adverts, but they also want to focus on the importance of customer security and privacy. Three don't claim to want to block all ads, but to instead offer choice and transparency. One assumes, then, that Three will give their customers the option to opt out of ad blocking; but also that they are hankering after a revenue share deal with ad networks.

If the aim is to provide more control and better advertising, but the only way to achieve this is through a revenue share model, then it begs the question how such a deal could possibly improve the state of advertising, as is apparently the intention. Outwardly, there is no reason for this model to improve ad quality. Instead, it will cause a significant rise in CPMs to maintain yield across the industry and it will ensure that mobile advertising becomes a luxury only afforded by super-rich advertisers.

But how much power do MNOs really have, to expect this of ad networks? We're forgetting that network-level ad blocking only affects users when they're consuming mobile data. A study carried out in 2014 in France, Germany, UK, and US, found that 89% of smartphone traffic was carried over a WiFi network (either consciously or unconsciously, with the use of mobile data offloading). The advancements in 4G since may have caused this to reduce, but it is still significant. Three won't be able to touch this; nor will it have any control over the vast number of ads pre-cached in-app (assuming this occurred over a WiFi network).

In any case, it's still a kick in the teeth for the digital advertising industry. Even IAB Europe were keen to voice their concern following the announcement, issuing a press release stating that Three's rollout of network-level ad blocking will hurt consumers and publishers across Europe and that it is "at variance with the principle of net neutrality and a clear interference in freedom of commerce".

ExchangeWire were keen to understand views across the industry on this move and what it would mean for the future of ad blocking, so we asked industry leaders to weigh in.

No consumer benefit

Network-level ad blocking has one winner (the carrier) and two losers (publishers and advertisers) and only time will tell what’s right. The model requires ad providers (SSPs, Networks) to pay the carrier in order to get their ads through. Assuming not all ad providers will jump on the wagon, this move dramatically limits the choice publishers have between them, making this consolidated space even narrower. Many publishers already adapted and implemented ways to identify when ads are blocked and keep the app from loading. Many apps have both freemium and paid versions so users who don’t want to see ads can always buy the ad-free version; but blocking simply means no revenue for the publisher. The advertisers also take a hit. Providers that do pay the carrier or consumers to get their ads through ad blockers will bear the cost on the advertisers, so the available user base will be smaller and more expensive. In a ROI-driven marketing space, this means media buyers and agencies will have to think twice which carriers they include or exclude in their campaigns.

While it seems like a good move for consumers, they have no real choice here and the only benefit goes to the carrier. Time will tell if this model wins.

Offer Yehudai
President of Inneractive

Blocking all ads not the answer

Consumers are annoyed with intrusive, non-skippable advertising. However, there are ad formats that are non-intrusive and these are much more acceptable to consumers.

Three has suggested ad blocking will give customers more control and choice but blocking all ads on mobile devices is not the answer. Mobile ads served in the right format, that are fully skippable, can also deliver this promise. In fact, research out this month shows that 79% of UK users would reconsider installing ad blockers if the ad experience provided them with the choice to skip or close the ad.

Todd Tran
Global Managing Director, Mobile & Programmatic at Teads

Ad networks could retaliate

I see this playing out over the next 6-18 months, depending on the perceived consumer benefit and how advanced the ad blocking technology is. Consumers won’t be aware of this, because it will happen behind the scenes — if Facebook ads are blocked by Three, Facebook could 'retaliate' by blocking Facebook services from Three customers. This pressures Three to whitelist their ads, in effect unblocking them and making an exception to their ad block services. Before any of this happens, stakeholders will probably sit down and negotiate a deal, just as Netflix did when their bandwidth was throttled on networks in the US. But carriers aren't really in a position to extract a part of the ad revenue. All of this will roll into the fees brands will have to pay to get their message across to consumers.

Ad blocking is more widespread in Europe and with desktop web browsers. As ad serving technology has consumed more processing power and bandwidth with ever more advanced tracking and delivery we see this as a response. I think the new dynamic playing out here is switching from an opt-in feature for advanced users, to an opt-out model where carriers are always looking for bolt-on services to differentiate themselves from competition. If consumers catch on, this will be the new standard for mobile carriers. Who knows if they start offering subsidised plans without ad blocking, or for lower income countries.

This comes into a wider debate on net neutrality. Could the government make ad blocking illegal? We could see that happen. It’s a worst case scenario for the carriers who benefit hugely from discriminating on different internet traffic, throttling certain companies and services to extract revenue from them and their 'baggage' on the network (as happened to Netflix).

We offer a solution that is immune to ad blocking technology; folding the brand message into lives of people around us. We call them micro-influencers. People can always opt out of following a person on Instagram, but it pressures the influencer to stay current, authentic and engaging.

Solberg Audunsson
Co-Founder of Takumi

Re-think ad experience delivery

The latest move by Three has highlighted once more how seriously (as an industry) we should be viewing the rise of ad blocking. With mobile operators taking more of a controlling role across media and advertising (e.g. Verizon acquisition of AOL/Millennial), their ability to set new standards that seek to protect their users will become more common – ad blocking is likely to play a key role here.

The conversations we’re currently having with clients, in response to this news, is to re-think how we’re delivering ad experiences on mobile, focusing far more on relevancy (e.g. through dynamic creative) and delivering ad units bespoke to mobile (versus repurposing desktop assets). I often view the pressure placed on the industry by ad blockers a positive – we still have time to claw back those mistakes we’ve made in the past.

Outside of advertising, I would question whether the move by Three is a step away from net neutrality, applying barriers to what can and can’t be accessed online.

Liam Pook
EMEA Mobile Director at Essence

Industry needs to take it seriously

Three have stated the rationale behind implementing network-wide adblocking: to prevent users being charged for adverts, stop companies using data without user’s knowledge and to eliminate ‘Irrelevant and excessive mobile ads’. It’s a signal that we, as an industry, need to take seriously.

Research shows users want advertising to be relevant to them, by implementing new technologies, like artificial intelligence, we can better target users with ads they will relate to, when and where they are most likely to engage with them. By serving ads users want to see, and ensuring they are skippable and frequency capped, we can improve their experience, while ensuring publishers are able to fund their content without resorting to paywalls.

Stephen Upstone
Founder of LoopMe