In the internet economy, Asia is often a harbinger for new services such as messaging apps or mobile payments. It's now way ahead on another trend -- more people in the region have installed software on their mobile phones to block web advertising than anywhere else in the world.
The upshot for media companies that rely on online advertising: stop overloading pages with intrusive ads and learn to live with lower revenues while experimenting with new methods on charging for content.
About 21 percent of the world's 1.9 billion smartphone users have installed an ad blocker, a level that has nearly doubled in the past year, according to a new study from PageFair, a company that works with web publishers to fight ad-blocking software. It's most popular in China, India, Pakistan and Indonesia, where many people access the web primarily on their phones and not on computers but is poised to spread to the U.S. and Europe as well.
Somewhat ironically for an e-commerce company that relies on ad revenue itself, China's Alibaba makes the world's most popular ad blocking tool -- its UC Browser is used by about 400 million people.
Only a few years ago, ad blocking was confined largely to desktop computers, and media industry executives predicted that mobile would be protected because the software could not eliminate ads in apps, the most common way of accessing the web on phones. And Apple and Google, which dominate the market for mobile operating systems, made installing ad blockers a pain.
Last year, analysts estimated that ad blocking had cost web publishers nearly $22 billion in lost ad sales, compared with $160 billion in online ad sales globally.
Now it looks like the industry's calm was misplaced. Consumers are eager to block marketing on phones because they're irritating on small screens, and cause web pages to load more slowly. Ad blocking technology has gotten better so can now strip out marketing in apps, not just on websites. It turns out people don't like their mobile data allowances being eaten up by sales pitches.
Things could get worse if ad blocking gets integrated with mobile networks. A few telecom operators, such as Digicel in the Caribbean, have begun offering it as a service to customers, cutting out pitches before they even reach phones. Hutchison's Three plans to trial the technology in Britain in June and may later roll it out to the six other European markets where it operates.
Beyond networks, Germany's Eyeo, which makes the popular Adblock Plus software, has teamed up with Asus to manufacture 30 million handsets with ad blockers pre-installed.
Media companies have failed to eradicate ad blocking via the courts so far, despite multiple suits brought by Axel Springer, the German newspaper and magazine publisher, and German broadcasters RTL and ProSieben. More lawsuits may follow -- PageFair says blocking ads on mobile networks violates net neutrality laws coming into effect in the European Union on Dec. 31, which require all traffic to be treated equally.
Instead of complaining, website owners may have to forego some revenue by settling for fewer and simpler ads that use less bandwidth, so as not to alienate mobile users.
Perhaps more importantly, media companies from newspapers to online magazines need to admit once and for all that giving away content for free and hoping to make money off of advertising is not a viable strategy. Getting creative with paywalls, subscriptions, and micropayments are all better options than warring with customers over ad blocking.
This column does not necessarily reflect the opinion of Bloomberg LP and its owners.
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