IAB UK Chairman, Richard Eyre, on ad blocking

30/06/2015
Blog posted by Richard Eyre
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Richard Eyre, Chairman of IAB UK writes about the latest mobile ad blocking developments facing the digital industry.

The business of allocating revenues in shared enterprises is fraught. Effective partnerships depend on all parties’ satisfaction with their deal but things change. The behaviour of companies at that inflection point is what determines the winners and losers in the next round. The winners construct new ideas, the losers flail around with lawyers and try to destroy the people they should be partnering.  Players in the fast-moving business around the mobile internet are now facing exactly this kind of choice. 

The CMO of an aggressive Israeli start-up maintains that mobile advertising is ‘abusive’ to the consumer, ostensibly because it uses their battery and their data plan. Predictably, Shine has invented a mobile ad blocker, software that allows users to access advertising-funded mobile content minus the advertising. Essentially stealing it.

Meanwhile, research from the IAB and YouGov indicates that the level that real people would pay if the ads went away could not possibly support the quality of services they have come to expect ‘free’.  Our research says people would pay on average 88p a month for social media and £1.33 per month for search.

So Shine’s proposal, which it says is being seriously considered by mobile operators (though none have yet owned up) is to suck the oxygen out of the market place under cover of improving the user experience.

Advertising is the currency of the web. People don't much like paying for anything, but advertising is very clearly preferred to any other form of transaction.  It supports an ecosystem that works for creators of content and services and for users, hence the £7bn spent last year in the UK alone on internet platforms, £1.6bn of that on mobile devices.  Advertising is also the simple mechanic that encourages innovation, as new entrants can safely count on earning ad revenues for a product people like.

For all their efforts at a customer service rationale, Shine are interested in flogging software, not worrying about the implications of all this for the infrastructure of the mobile web.  But to the untrained eye, the arrangement looks like a plan to undermine the providers of the very services customers buy mobile data plans to consume.

The argument, widely reported, that having failed to develop successful content and services themselves, mobile operators are frustrated that digital media companies profit from their high speed networks without having invested in the infrastructure behind them is bunkum. The business model behind that infrastructure investment did not depend on any plan to defy net neutrality and harass the suppliers of online content and services into parting with a revenue share.

That business model was, rightly a calculation that irresistible content and services available to the mobile device would create unprecedented demand for high speed data.  Up to now, this has been the real product of the mobile operators, but things are changing.  

A couple of weeks ago, Verizon bought AOL; and Sprint and T-Mobile are partnering with Google on Project Fi, a new wireless service that Google is launching to offer mobile services directly to users. Last year, What’s App agreed with the third largest German mobile operator, E-Plus to sell a prepaid SIM that gives users unlimited access to WhatsApp outside their data plans.

T-Mobile CEO John Legere said last month, ‘It's clear that content, social media and entertainment are all moving to the Internet, and the Internet is moving to mobile. As we think ahead, I still reiterate that in five years, we'll think it comical that we thought of the industry structure as the four major wireless carriers.’

What we are witnessing here is much more than a dispute over the distribution of the spoils from substantial market growth;  it’s a major market movement.

Smart players do not try and defy market change by briefing their lawyers or trying to kill their future partners. The winners will be the creators of new imaginative partnerships, not those who try to defend the status quo with litigation or belligerent tactics like ad-blocking.

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