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Thoughts on ad blockers, native ads & the changing ad landscape: Prashant Singh


By Prashant Singh, Founder, Shifu

Recently, after Apple allowed adblockers on its platform, there has been a lot of chatter around the impact of adblocker publishers’ business model and the ethics of adblocking. There are valid arguments in favour of and against adblockers. While both sides have strong opinions, the one thing missing from the debate is the understanding of the governing variable: what are the underlying motivations? Why are adblockers suddenly in vogue? Is it just an Apple thing or is it part of an underlying bigger shift? What can we possibly do to prepare? Here are few thoughts on this.

What’s actually going on?

It’s business as usual. When you look beyond headlines and hyperbole, you will see a slightly different picture. There was a lot of hype when Apple launched Apple Pay. It was touted as something that would kill everything from Square to PayPal to Google Wallet. But most commentators failed to notice these critical external factors:

(1) Apple introduced the fingerprint scanner ahead of Apple Pay and later on used it as a key part of Apple Pay experiences. They primed the user for a new way of authentication, then used that authentication mechanism in Apple Pay. 

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(2) The biggest hurdle in the ‘adoption of payment’ system is the widespread availability of compatible Point of Sales (PoS) equipment. Fortunately for Apple Pay, the payment ecosystem in the US was at the cusp of a massive change. This month onwards, US based merchants will witness a Liability Shift, meaning that if someone uses a stolen card to make a purchase, the transaction liability will be on the merchant, as opposed to the card issuer bank or payment network previously. This will lead to a massive overhauling of POS systems to incorporate NFC/EMV-PIN based credit cards.

Notice how Apple Pay stands to benefit from an external trend while Google and other players had to wait for it. Similar dynamics are at work when it comes to adblockers.

(1) Most of the content centric apps are developed around web-view, because: (a) web-view offers flexibility in terms of managing your content flow and (b) it allows publishers to have some level of continuity of experience across Android, iOS etc.

Apple wants developers to invest in making a unique and preferably better experience for iOS. Like Flash, web-view is a problem to that effect. No wonder adblockers work in webview. Now as a publisher, one way to save yourself from the onslaught of adblockers is by investing in a proper native app, thereby reinforcing Apple’s stronghold.

(2) Is it a coincidence that Apple started allowing adblockers on its platform while also launching Apple News? Apple would like you to think that these two developments are unrelated, but it will be naive to think they are. 

(3) A broader shift is happening in the content ecosystem. From a destination centric world where consumers had a direct relationship with content creators, we are shifting to a world where we consume most of our content via intermediary platforms like Facebook, Twitter, Medium, WeChat, LinkedIn and (hold your breath) SnapChat. The writing on the wall is clear: Your website is toast, Future of Internet is TV.

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As content discovery becomes a bigger and bigger problem, the balance of power will shift toward platforms. Apple is not alone, SnapChat stories drive massive traffic, WeChat is big in China, Facebook is launching Instant Articles. In the scheme of things, the real adblocker that publishers should worry about is SnapChat stories and Facebook Instant Articles.

Many folks in industry are reacting to adblockers from a position of ideological servitude: Don’t do it because doing it is against the ethics of publishing. It’s hard to argue with rhetorics like that. They are not wrong, they are just irrelevant. End users don’t care where they get their content from as long as they get their content. This is neither unexpected nor unprecedented.

A few years ago, a telecom operator attempted doing something similar by using ‘on the fly’ transcoding of web content via their WAP Gateway. It tried to insert its own advertisement in the name of improving user experience,  and offered a publisher to partner with it. But it never really went anywhere because (I) Smartphone usage was not that massive back then and (II) their product was crappy. This is not the case with the likes of Facebook, Medium, and SnapChat, they have a massive distribution power and have nailed the user experience. The problem is real this time.

But is it really all that bad?

I don’t think so. I don’t think that moving from a website based content distribution model to a platform based model is such a bad thing for any of the involved parties. Let me elaborate.

Today every time you visit the website of any popular news site, your browser loads anywhere between 10–16 snippets of javascript just so that it can server proper ads. This increases page load time creating a suboptimal user experience. The publisher still needs to do this because in absence of these scripts, he can serve targeted advertisements.

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Enter Facebook: they have your identity and interest graph. They can do a better job of targeting without compromising on user experience. This is where being a platform helps. As a publisher, you now need to split your ad revenue with Facebook, and not with third party ad networks. I assume that most publishers would be fine with it because revenue numbers won’t change that much. Our friends at the ad networks were not particularly generous in sharing the ad revenues.

Another thing that works against old fashioned ad networks is the fact that they have no incentive to ensure a good user experience (exhibit 1: Full screen interstitial banner Ads), whereas Facebook wants to ensure best user experience since it wants users to come back to it.

This brings me to my two (totally speculative) hypotheses about Facebook Instant Articles:

(1) This marks the start of a shift towards Native Advertisement: Here the advertisement adapts itself around content. No flashy ‘Punch the Monkey’ banner ads but curated, in stream advertisement, which looks very much like content. Facebook is hardly the first one to attempt it, BuzzFeed is doing it along with some other publishers. Some do it in a manner where content is undifferentiated from the ad while others make this distinction very clear. If Facebook enters this game, it will bring much needed legitimacy for the format and the ad yields will be higher.

(2) I believe that Facebook Instant Articles is a precursor to FB’s version of ‘off domain-syndicated advertisement’, an equivalent of Google AdSense. Once Facebook refines their engine by serving native advertisements around your content, it’s only a matter of time before they flip the switch and start serving similar advertisements on your domain too. This will be an interesting battle to see.

Balance of power

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As a publisher, it’s only natural for you to be concerned about the loss of control over your audience. It’s natural to think that if Facebook or Medium acts as a gatekeeper for access, then you will be reduced to a mere content factory at the bottom of the food chain. While I am all for being cautious, I would rather err on the side of cautious experimentation than resort to a paranoid denial. It’s in the vested interest of these platforms to ensure that the right content is surfaced. This is not the first time it’s happening. We delegated the control of discovery to Google Page Rank algorithm and in the long term, it has worked out well for everyone.

In my opinion, change in content consumption will not be in the form of switching loyalty from the publisher. It will be more around atomicity of consumption units. We will have loyalty on per post/article basis, not on publication, like what happened to music consumption on iTunes: we moved to consuming singles instead of buying CDs. This will be painful in the short term but better in the long term.

Interestingly, this will also make room for products offering a neutral third party native advertisement and service discovery mechanism. How Spotify is to music, we will see products which will enable service discovery and native advertisements in a platform-neutral way. There will be balance of power. What companies like InMobi are attempting to do with their Miip platform is a sign of things to come. InMobi is not alone there are many who think this is the way of future.

So the game is not rigged in the favour of incumbent behemoths. At least not at the outset. There is room for third parties to participate and I am confident that companies like InMobi, Cyanogen and others will be serious contenders in this space. What’s inevitable is the shift to new form of advertisement and a significantly better user experience. It will be interesting to see how this plays out in next few years.

Read the original article here.

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