Analysis: How apps and better ads can save the market.
This week, Samsung followed Apple’s footsteps down the ad-blocking route, in a sign that device-makers are seeing an ad-free mobile experience as a differentiator.
Samsung’s default browser on its mobile devices will now allow third-party ad-blockers, following Safari being opened to ad blockers in the latest version of iOS.
It’s an interesting move that could have large repercussions for advertisers.
According to a Zenith Optimedia study in September 2015, 2016 will see mobile advertising overtake newspapers and become the third largest advertising medium behind television and desktop internet. It is expected to reach a valuation of $71 billion globally.
Ad-blockers as they currently exist will affect the web ad category, which eMarketer projects will be $10.84 billion by 2016.
The ad-blocker is really about conflicting interests. From Apple and Samsung’s perspectives, the motive is simple: improve the user experience. Once Apple could guarantee its users a more ad-less experience, Samsung as a competitor in the high-end market saw a chance to compete with Apple by providing the same user experience benefits.
"From the perspective of the relationship with the end-user it shows they are making an effort to free them from ads," says Stephanie Baghdassarian, Research Director at Gartner.
"Samsung allowing ad-blockers is one way to differentiate and one way for Samsung to follow Apple."
"For device vendors, the browser is an extension of their brand," says Oisin Lunny, senior market development manager at OpenMarket. "In the way that they want to provide a premium feel and look to their handsets, they want to deliver a premium experience too."
The device-makers are free to make this choice because any advertising revenue that they do derive comes primarily from within their apps.
"Samsung do have some apps but ads in those will remain," says Baghdassarian. "Samsung ads do not form a significant core of their revenues.
"For Apple, because they are doing the device, operating system and app store they get a share of the ad market. It doesn’t impact ads within apps so directly Apple is not missing any revenue when it is browser-based."
While this is especially true of the device-makers, there is also a general trend towards using apps to deliver ads to consumers rather than mobile browsers.
"In-app advertising has been the area where growth has been highest for several years," says Baghdassarian. "This was before these revelations. But it will be even more the case now that device-makers are cutting ads in browsers."
The eMarketer study cited above found that in-app ad spend would be nearly triple mobile web ad spending at $29.66 billion this year.
In other words, the ad-blocker trend is not changing the landscape, it is just emphasising changes that were on the way anyway.
"An increasing number of companies are engaging consumers through apps rather than through a mobile web site.
"If you look at the trends, apps are where a lot of the traffic goes anyway. There is a displacement of traffic towards apps."
Moving towards app-led advertising is one solution to the ad blocker problem, but for those that are not ready to abandon the mobile browser there are some ways that the growth of ad blockers could be stemmed.
To find a solution, it is important to consider why ad-blockers are used in the first place.
James Davies, Head of Sales and Trading at xAd, the global location marketplace, says: "One of the major reasons ad-blocking has evolved is due to some advertiser not taking into account the user experience. Our mobile phones are one of the most intimate objects we have so receiving any kind of messaging that is not relevant, makes it feel like a personal intrusion."
This personal sense of ownership is one way in which mobile differs from desktop, and is something that applies in particular to advertising.
"Ad-blocking is a clear symptom of a problem, rather than a problem itself," says Antti Pasila, CCO and Founder at Kiosked. "Poor user experience in digital advertising is destroying consumer experience for mobile users. Irrelevant, untimely, internet data-greedy and intrusive ads are all to blame."
Advertisers seem to be realising that mobile advertising will require a targeted approach to preserve mobile browser revenues. Lunny of OpenMarket explains that this requires "a move away from the ‘spray and pray’ strategy employed by many today to a more customer-centric approach looks to be the best means of survival."
What are some of the techniques that can improve this experience? Luke Moore, EMEA Sales Director at Crimson Hexagon, argues that data will be a key driver of better advertising on mobile.
"One way marketers can do this is by tapping into social media data, leveraging more than a decade’s worth of public opinion to help inform and measure success," says Moore.
"It’s arguably the greatest tool to demonstrate ROI in digital marketing within the last decade that so far has been largely unused by marketers.
"Social networks represent one of the most powerful means of capturing global attitudes and recognising evolving consumer trends we have ever seen. By analysing public opinion and understanding what an audience thinks and feels, marketers can design campaigns and content with the customer in mind."
This analysis is borne out by the numbers. Facebook, for example, in its Q4 derived 80 percent of its revenues from mobile advertising.
Ad blocking, then, is hardly a death-knell for mobile advertising. But that doesn’t mean that advertisers don’t need to react to it.