PageFair and Adobe recently published a study that claimed “$21.8bn in advertising revenues will be lost in 2015 due to ad blocking.” I feel obliged to dispute this claim. PageFair’s methodology was poor, and even in a parallel universe where their data is correct, they and other ad publishers deserve to lose out on more than $22 billion.
PageFair estimates that 16% of the US’s online population is using ad blockers. Monthly ad block users are “calculated by combining a number of sources.” While PageFair describes how they get these sources, they do not provide raw data, or their method of “combining” it together.
Next, they divide the previous year’s reported revenue by 1 minus the ad block percentage to get “potential” revenue. The difference between reported and potential revenue is counted as “lost.”
Assuming that their estimated percentages of ad-blocking users is correct, they are further assuming that those users click on ads at the same rate that non-blockers do. The majority of online advertising is performed on a pay per click (or thousand clicks) basis. I find it hard to believe that users who go out of their way to install tools to block ads would click on ads as much as others.
PageFair is making another assumption (for those keeping count, we’re at assumption level 3): advertisers are willing to spend an additional $22 billion. The report does not account for price elasticity. If there is such huge demand for ad space that can’t be filled, prices should increase. Every major online ad publisher supports pricing based on demand. For $22 billion to be lost, advertisers must want to spend that much more in the first place.
Why do people block ads? I presume the primary reason is because ads are annoying. Nobody wants to watch a 30 second ad before a 20 second video on YouTube. People don’t want to struggle to click a tiny, moving close button on an ad displaying over the article they’re reading. Users sure as hell don’t want their ears assaulted by an advertisement that automatically plays after they’ve started to scroll down a page.
Ads also consume a considerable amount of data. On mobile networks where users pay by the gigabyte or megabyte, is there anyone who wants to spend that money on advertisements?
Researchers at Simon Fraser University found that installing ad-blocking filters on a university network switch decreased bandwidth usage by 25%. On streaming video sites, bandwidth usage was reduced 40%. The Simon Fraser study had a small sample size of only 6 computers, but it goes without saying that downloading ads (which are frequently the largest elements of a page) will use more bandwidth than not downloading them.
Advertisements also can create massive security risks. Ad publishers frequently serve malicious ads. Scams like “6 simple tricks this single mom discovered to make $85,000 a year working from home” are irritating, but more dangerous are malware-infested ads. Since ads are tailored to users and are frequently cycled, it can be hard to track down which ads are infected. On Halloween, PageFair served advertisements with JavaScript that downloaded trojan viruses. Of course, this was only an issue for those who were not using ad blockers.
PageFair’s $22 billion number probably isn’t real. Honestly, I wish it was. If starving these companies out was as simple as downloading an adblocker, maybe they wouldn’t be around to drag the internet down with them.
