Cracking the Ad-Free Model

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In an age of ad blockers, marketers are exploring alternative solutions from micropayments and paywalls to earned media, with mixed results.
Marketing

We've all seen it happen: webpages that take a few extra seconds to load or interstitial ads that take over a screen. Consumers are increasingly annoyed as websites add more ads, videos, images, social plugins, and other code-heavy features that slow down broadband connections. Publishers have also increased their usage of tracking and analysis tools to learn more about their visitors. Third-party data trackers require additional data fetching tasks, leading to even slower load times.

It's therefore no surprise that ad blockers appeal to consumers who are tired of such poor user experiences. But content isn't free. The rising adoption of ad-blocking software is sending ripples of alarm through the advertising and publishing industry who see this as a threat to existing business models. As a result, companies are responding with a wide array of solutions to ad blockers.

The Rising Specter of Ad Blockers
In 2015, the use of ad-blocking software grew 41 percent from the previous year, with 198 million active users worldwide, according toa study conducted by Adobe and PageFair. Ad blockers were among the most downloaded apps whenApplemade them available in its App Store last fall. Furthermore,Microsoft has saidit is including an extension to its Edge browser that supports Adblock andAdblock Plus later this year.

Jessica Rovello, the CEO of Arkadium, an online game developer that creates games like Sudoku for publishers, compares ad blockers to an approaching earthquake. "We have yet to feel the seismic impact of ad blockers, but we know it's coming," she says. "We work with over 400 publications and we know it's becoming an issue for many of them."

Arkadium is experimenting with other revenue models such as asking players to pay a small fee for extra lives or additional features but none are as lucrative as ad-supported models, Rovello notes. "As a consumer, I understand why people find ads annoying, but as an industry, we need to do a better job of educating our audiences on why we're asking for their time," Rovello says.

Think L.E.A.N and D.E.A.L
The Interactive Advertising Bureau (IAB) shares Rovello's sentiment that the use of ad blockers must be addressed and is attacking the issue in several ways. Last fall, the IAB debuted a new approach to ad standards. The L.E.A.N. Ads program, an acronym for light, encrypted, ad choice supported, non-invasive ads,introduces a set of standards for creating better user experiences. The program advocates practices like not pre-loading ads when the units aren't in view andlimiting calls from data-collecting trackersthataren't necessary for deliveringmore targeted ads.

The IAB also put together the Publisher Ad Blocking Primer, which outlines engagement strategies for publishers to use with visitors who have downloaded ad blocking software.The primer boils down the tips into another acronym-D.E.A.L (Detect, Explain, Ask, and Lift or Limit). After detectingad blocking on their site, publishers should explainthe value exchange that advertising provides, askthe user to disable the ad blocker, and either liftrestrictions orlimitaccess depending on the consumer's actions. TheIAB Tech Lab also made anad blocking detection script availableto IAB and IAB Tech Lab members.

Over the past few months, publishers have been experimenting with numerous approaches to ad blockers, many of which are outlined in the primer. Forbes, for instance, greets visitors who are using an ad blocker with a message on its "welcome screen" ad page. Forbes asks those visitors to turn off the ad blocker in exchange for an "ad-light experience" for 30 days.

An ad-light experience means "no welcome ad, no video ads inserted between paragraphs, and no interstitial ads between posts," writes Forbes Chief Product Officer Lewis DVorkin. "Since December 17,4 million desktop visitors, or 42.3 percent of those asked, have either disabled their blockers or whitelisted Forbes.com [and] With those blockers disabled, we delivered 63 million ad impressions that would have otherwise not been seen." The company also plans to audit the file size and load time of ads as well as the number of cookies dropped on screens, DVorkin adds.

Subscriptions and Micropayments
Other companies are charging ad block users a micropayment or subscription fee. Last month, Wired began asking readers to either add Wired.com to the ad blocker's whitelist or pay $1 per week or $3.99 every four weeks for an ad-free version of the site. Wired offered this explanation on its website: "Our team of journalists creates 30 posts every day, with the same commitment to great storytelling and impactful design as the magazine. We have valued ad-free access to this experience at $3.99 every four weeks."

Google recently introduced YouTube Red, where viewers can watch videos and listen to music without ads for $9.99 a month. Vessel, a video subscription startup led by former Hulu CEO Jason Kilar, is also offering an ad-free experience in a $2.99 monthly or $19.99 annual subscription.

Of course, publishers will also have to consider the cost of maintaining a billing system and whether enough users will subscribe to the ad-free service. "Subscriptions are unlikely to offset the decrease in [ad] revenues experienced by publishers," maintains Felipe Ogibowski, CEO of mobile app advertising platform IconPeak. "A subscription model relies on already having engaged and returning users who are willing to set recurring paymentssmaller sites and blogs that don't already have a large following and a significant proportion of their audience as recurring users, are thus very unlikely to be able to monetize their traffic and survive."

Paying for Impressions
Another option is to pay users to view ads. Sprint's Boost Mobile, for instance, will give users a $5 account credit in exchange for watching ads on their phones via the Boost Dealz app. But given the risks of people abusing the system, it's unlikely to catch on. A more popular approach to earning impressions is influencer marketing. Sponsored posts are gaining traction since they generally go undetected by ad blockers and are considered more engaging and informative than a banner ad.

In fact, 35 percent of social media professionals polled last year considered their use of influencer marketing to be at a mature stage, and only 14 percent didn't plan to include it in their social strategy, according to Altimeter Group's "State of Social Business" study. However, finding the right influencers and generating sponsored posts quickly can be a challenge, especially for small businesses with limited resources.

Ultimately, there isn't one right way to monetize content, and so publishers should experiment to find what works for their audiences, advises Bill Nagel, chief marketing strategist and co-founder of Netsertive, a digital marketing intelligence company."Diversification is key," he says. "Give people options for consuming your content [and] the more that companies can diversify their spend the better."

Advertisers must also accept reality, that "ad blockers are a symptom of the larger issue that the online ad experience is broken," says Roman Karachinsky, co-founder and CEO of news personalization startup News360. "The ad industry has betrayed the consumer's trust and the sooner that we begin repairing the damage with better experiences, the sooner this will be less of a problem."

EXPERT OPINION
EXPERT OPINION