Larry Page

Google Losing Billions in Adblocking Devil’s Deal

The PageFair Team Acceptable Advertising, Ad Networks, AdBlock, Monetization 8 Comments

TL;DR: Google minimized the revenue impact of adblocking in last week’s stockholder meeting, but by our calculations the actual costs are staggering. Worse, by being whitelisted under Adblock Plus’s acceptable ads program, Google is probably the primary source of funding for future development of adblocking technology.

Google Acknowledges Adblocking

At the Google 2015 Annual Stockholders Meeting last Wednesday, Larry Page fielded a tricky question that has some alarming implications for the future of the ad-fuelled giant.

During Q&A a stockholder asked whether adblockers are having any effect on advertising, Google’s primary revenue source:

Neatly sidestepping the actual question of the effect of adblocking on his bottom line, Page delivered a mea culpa for advertising in general, saying “the industry needs to get better at producing ads that are less annoying.” Such passive acceptance of the merits of adblocking is in stark contrast with the legal action currently being taken by other companies to combat adblocking. He went on to talk about how Google has pioneered making ads better, citing search ads as a prime example:

A lot of places where ads get blocked, search ads do not get blocked.

This innocuous sentence in fact refers to the most controversial topic in the adblocking debate: Google’s relationship with Adblock Plus.

Adblock Plus operates an “Acceptable Advertising” scheme, under which “large corporations” must pay to have permissible ad formats (such as sponsored search links) whitelisted. While Adblock Plus believes they are offering a fair compromise, most publishers have likened it to “racketeering” [MondayNote], “extortion” [Tom’s Guide], “shakedown” [Digital Trends], “blackmail” [Pando Daily] and “highway robbery” [Pro Sieben Sat1]. Most controversially, it was revealed in 2013 that Google is dealing with Adblock Plus to get its search ads whitelisted.

Google isn’t the only search engine handing over a slice of its revenue to the adblockers, but this is the first time they have acknowledged their participation with anything other than a “no comment”.

Funding Adblocking

For most publishers, it’s demoralizing to see that Google, even with all its resources, decided to pay rather than fight. With adoption growing virally worldwide, Adblock Plus now wields enormous power, and occasionally flexes its muscles to issue vague threats, such as this letter to Twitter.

But even more controversial than the debate over the ethics of adblocking is the sheer scale of the payments being made – and what that money is funding.

It is safe to assume that Google – rumored to be paying $25 million – is the largest customer on the Acceptable Ads program. This is a relatively small sum for a global corporation with revenues of nearly $60 billion, while being a huge cash injection for a fast-growing adblocking startup in Cologne. It is not credible that these funds are simply being spent on the administration of the acceptable ads program. Instead, they are presumably being reinvested in the future development of adblocking. For example, in January, Adblock Plus announced Active Directory support to enable the deployment of adblocking across entire corporate networks, and in May, Adblock Plus launched its first mobile browser, likely to multiply its growth and devastate mobile revenue, just as advertisers finally arrive en masse to the platform.

Although paying Adblock Plus may recover some short-term search engine revenue, it also tightens the adblocking stranglehold on the remainder of Google’s revenue.

adblock-rise

Limited Effectiveness

All this controversy serves only to recoup a fraction of the revenue lost due to adblocking. Let’s take a look at what Google is getting in return.

First, Adblock Plus will only whitelist “static advertisements”, and not “attention-grabbing images”. This precludes Google’s display and video ads businesses. YouTube ads are seamlessly blocked, along with ads on “network members’ websites” using Adsense or Doubleclick.

Second, there is no guarantee that Adblock Plus users will see whitelisted ads. Many Adblock Plus users have chosen to opt out of Acceptable Ads, and as more ads appear, it’s inevitable that many will continue to do so.

Third, Adblock Plus is only one of many different kinds of adblock. The other adblocking extensions are more militant and don’t support whitelisting. The closest competitor is the “other” Adblock, which actually commands more market share on Chrome. The new open-source uBlock is gaining fast traction in Silicon Valley tech circles, due to its no-compromise approach and efficiency claims. If neither of those adblock extensions suit, there are dozens more to choose from.

$3.5bn Saved / $6.6bn Lost

At PageFair we work with thousands of publishers to analyze and combat adblocking, so we decided to combine our numbers on adblocking with Google’s 2014 Investor Data and market data from eMarketer and Comscore. Our data show a US adblocking rate of 13.6%. However, our data may reflect a slightly higher rate because the publishers that sign up with us usually already know that they have an adblocking problem and are actively seeking a solution. For argument’s sake, let’s say that the US adblocking rate is 10%.

Business Unit US Revenue
($ millions)
Adblocked Revenue
($ millions)
Recovered via Adblock Plus Whitelist
($ millions)
Remaining Adblocked Losses
($ millions)
Video
(Youtube)
1,720 191 N/A 191
Search
(Google.com)
17,667 1,964 942 1,021
Search
(Adsense for Search)
864 96 46 50
Display
(Adsense & Doubleclick)
5,387 599 N/A 599
TOTAL: 988 1,860

The above table breaks down Google’s business areas by ad format, extracts US-only revenue, applies a conservative estimate of 10% US adblock penetration (we believe it is actually closer to 14%), and tallies up the amount of revenue recovered through the Adblock Plus deal versus revenue that is still being lost.

We calculate that, while Google is recovering roughly $1 billion in US revenue by being whitelisted, almost twice that amount is still lost due to Adblock Plus and its competing extensions.

These figures reflect US revenue only. 57% of Google revenue is international, and Europe’s adblocking rates are notoriously higher. Our estimates put the global numbers at roughly $3.5 billion saved and roughly $6.6 billion lost. You can check out the source data if you want to double-check our calculations.

Google losing $billions to global adblocking

Elephant in the Room

With such staggering losses, it looks like that one lone stockholder was right to stand up and point out the elephant in the room. Google needs to find a real answer to adblocking, rather than sounding off a few uncomfortable lines that would sound better coming from an Adblock Plus spokesman. Adblocking is set to increase by at least 50% this year, and far from there being “no major change in that dynamic,” it is now crossing over into mobile. With 90% of its revenue derived from advertising, Google needs a better and more comprehensive alternative than relying on the mercy of the current adblocking kingpin.

Google stockholder points out elephant in room: $billions lost to adblocking

DISCLAIMER: Although we make every effort to be objective, PageFair is an anti-adblock technology company. We work with publishers to diagnose adblocking, provide an adblock-focused advertising solution (endorsed by the Acceptable Ads program) and provide custom anti-adblock solutions to premium publishers.

  • dgladys

    You guys really don’t get it, do you?

    I use AdBlock for some specific reasons. Those reasons have an origin. Think it through, establish a focus group, get some people together to use managementspeak words, but, for Pete’s sake THINK!

    I object to the bandwidth hogging video ads, the flash ads, the animated ads, popovers and popunders.

    Popovers in particular and animated ads in general are, basically, bloody rude. If you think otherwise just try this: You are having a serious conversation with little Johnny’s father. Little Johnny is leaping up and down yelling “lookatme, lookatme” and pulling a funny face. Do you a) think how wonderful little Johnny is and how comical he is or b) wish his dad would give him a thick ear and explain that its rude to interrupt people like that and that he should wait and ask politely for attention when the conversation finishes. I submit b)

    I also heartily detest targetted marketing – all that seems to do is tell me the place I just bought a widget from, sells lots of widgets. Hello guys, but I am all widgetted out and you’re only succeeding in pissing me off.

    I detest having some kind of subscription based “free” delivery platform forced down my throat. Hullo Amazon, thanks for that. Its why I now start shopping someplace else rather than suffer your Prime marketing.

    I’d also love an explanation of why I should be interested in what other people bought when I want to order a widget. Why the hell should I care?

    I also have a big problem with the gaudy splash ads at the sides of some online journals. Thank God AdBlock kills THOSE stone dead. – We are back to that little sod Johnny.

    Show me a “special offer” and I’ll start checking round. Funnily enough I can almost always do better than the “special offer”.

    Look at it this way: At ad time a company is trying to impress me with its product – that’s a given. It is also trying to impress me as being an outfit I want to do business with. Mindless ads that seem designed specifically to hack me off are scarcely going to make me want to do business. At best my interest will be in spite of the ads and even then I’d be looking for some place else to go. Think Darwin and survival of the fittest.

    It’s not as if minimal ads don’t work; Google seemed to be doing very nicely for a long while (although even they are now getting on my tits a bit with the mindlessley ad seeded “search results”

    In summary; as far as I am concerned there is one reason and one reason only driving my use of AdBlock. The stupid mindless actions of the advertisers (and their principals) themselves.

    • “I also heartily detest targetted marketing – all that seems to do is
      tell me the place I just bought a widget from, sells lots of widgets.
      Hello guys, but I am all widgetted out and you’re only succeeding in
      pissing me off.” Pissing you off? you must have some problems in your personal life sir If you get pissed off by ads.

      Anyway ads are needed and adblockers are killing the internet, it’s like I dedicate a lot of time on researching a subject and write a great article about it, you read the article because you wanted to know more about the subject and all I ask you is to merely watch at the advertising posters which are mainly next or at the end of an article.
      By doing so you credit me for my hard work by just watching an ad instead of paying me cash, but with adblockers on the rise writers and content creators like me don’t get paid anymore, we used to make a living out of bringing content to the world (modern journalism, think of the people that give their lives to report the war in Ukraine etc) and you guys didn’t have to pay at all but now… don’t you think a journalist deserves some income to feed his family? or a researcher, a video maker, wouldn’t that be fair? Because if you stop paying us we’ll stop making content which leads to big corperations surviving and being the only source of content again (they’d control any form of media again)

      • 151rum

        Boo hoo, you dont make enough to make a living by spreading your baseless, onesided and nonfactual “opinions” anymore? What a shame. Now how is it I can make such a claim and seem to know you so well? Simple “ads are needed and adblockers are killing the internet” right there. Please, enlighten me, with some facts, that you obviously spent so much time “researching,” on when the internet is going to die, since it is being killed.
        I want to share with you a statement made by conservant, ad partner for Skype, found here http://www.conversantmedia.com/our-approach#recognition_reach
        “We don’t just assign IDs to millions of consumers. We build profiles around them that are
        so robust, WE KNOW THEM BETTER THEN THEY KNOW THEMSELVES.

        We track over 1 million online actions per second to build each
        profile across more than 7,000 dimensions—including web browsing, app
        usage, video plays, email activity, cross-screen engagement, life
        events, hobbies, ad interactions and product interests. All in all,
        they’re the most complex consumer profiles ever built, allowing you to
        really get to know your customers and grow your relationship with them
        over their lifetime.”
        No, no no no no no… Go ahead, kill the internet, please.

        The internet has been overrun by the imbecilic and ignorant voicing their delusions and claiming them to be fact, and getting paid for it by cramming as much ad garbage as they can on their pages making them near unreadable, slowing peoples experience and essentially “killing the internet” in their quest to make money by doing nothing. Had their (your) greed been kept in check and ads kept to reasonable levels ad blockers would still be a non issue. So you can go ahead and give yourself a big slap on the back and high five for creating an atmosphere where ad blockers have become a necessity to be able to do just about anything online, Good job. On the subject of content, there is a difference between quality and quantity. Take this article and your comment, both are lacking in quality, should you make enough to “feed your family,” no. Should other “journalists,” other content creators, be making a livable wage? That depends entirely on the quality of their content and no, most should not, the quality is just not there. Yet they feel that since they put something online, once a month, if that, without any facts, they are “entitled” to stupid amounts of money. You talk of fairness, I would love to see you expand on that. What is it that you “feel” is fair for say, this article here. How much do you feel the content creator should receive for his efforts here? I am being dead serious, no sarcasm, no nothing else. A real answer would provide a lot of insight.
        Advertising on the internet has become something just sickening. Show me all the ads you want, track my mouse on your site, fine whatever. Keylog me, track every site I visit, etc, and no. You can go to hell. No, you should not be getting paid.

        • noseriouslyshoveit

          Finally, someone who’s not a complete idiot. I can’t believe this guy really thinks we or anyone cares about his miniscule admoney generated to support his shitty blog or “articles”. Please. Nobody wants to hear your opinion or even cares and nobody wants to support you. Why not go find a way to actually be useful and rather than bloating the internet with your worthless “journalism” and go do something actually useful. I hate people who think they should be getting paid ridiculous amounts of money…or even livable wage money for doing nothing or barely working your ass. I’m in the scientific research field babe and you…you shouldn’t be paid anywhere near liveable wage and nor should any sitting-at-home ass blogger mooching their way around and crying like a bitch when their $10.50 comes in at the end of the month. Pfft. Get a real job slacker.

          • 151rum

            Lets go one more step, you and I, our posts, they are “original content” and we are the “content creators,” right? So, where is our money. We put our OC on the interwebs, should we not be able to support our family too? I mean come on, its like we are paying for it… But wait, blocking ads is killing the free internet, right? If its free why do I pay over 200 dollars a month for access between my home and phone? And check this, I value myself, at least a little anyways. The value that all the advertisers out place on me must be pretty high too if my blocking ads, even cumulatively, is affecting them. Googles losing billions from blocking ads, so they are making many many more billions off of selling me/us in the name of “providing” us “free” content that is baseless regurgitated garbage that had we not seen would have had no discernible affect on our lives, in essence providing no benefit to the content consumers who are paying for it, e.g. “me.” Because be real, we are not talking lost revenue from static adverts that people arent seeing, its lost revenue from people blocking companies ability to datamine us in the name of keeping the “free internet free,” yeah yeah, right… I would gladly pay for access to this free internet… Hmm…

            Now let me be serious for a moment, I wasn’t playing when I asked where my money was, my original content is now here for the world to consume, I expect a private message shortly with details on how I am to be paid for helping your content to be seen and for my “hard work” and time I have exerted in replying to this dribble, I am sure “noseriouslyshoveit” would like to know how they are going to be paid too.

            I bet we don’t even get a thanks.

  • 151rum

    People are stupid, and a lot of them are going to believe this trash. But really, people are stupid. Take “the internet is free… unwritten contract, blah blah” I don’t know what “internet” you are on, but mine is most certainly not free. Between home and phone I pay close to 200 a month for the privilege of ad companies selling, well, essentially “me,” to who?… Oh, yeah, anyone willing to pay. But they don’t sell to 3rd parties, until they do business, then they are not a 3rd party, now they are a “partner” or “affiliate” or whatever BS they want to say to appease the ignorant masses. I don’t understand what is difficult about this, me, you, add another and what do you get? 3.
    Here is my biggest issue. I, as a person, have value. I have value to myself, value to you, value to them. The value I place upon myself is a whole hell of a lot more then say, your articles value to me. What I like, what I read, what I do, where I go, how long I do it, unidentifiable fully personally identifiable information like my IP address, with which my exact geolocation is easily found, and my home, and address, and everything that goes along with that.
    All neatly packed, sold to data aggregate companies that resell me, to anyone.
    You know, just a couple of years ago all of this would of been called keylogging, spyware, etc. what happened to make this acceptable. Oh yeah, people are stupid.
    My not allowing some company, (sorry, companies, how many is it making money off me reading this article? 20+?) that I have had no business with and have no relationship with whatsoever, to log me, then sell me, and make money off of me while giving me absolutely nothing in return? Unacceptable. No, the ability to read your inaccurate diluted opinion piece is not worth the free price tag that costs so much.
    This reminds me, I went to buy a pack of smokes a couple weeks ago, I am 37 and look no where near 18. The cashier asks me for ID which is really just moronic and a waste of time for someone that is obviously, without a shadow of a doubt, not a ****ing teenager. I look at her before handing it to her already knowing why she wants it, make sure I have her attention and tell her “you can not scan this, you can look and type in my DoB if necessary, but you do not scan this.”
    Looking me dead in the eye she says “sure I can *swipe, see,” then some things happened that do not matter here, but at the end I was left thinking, customer service has always been kind of hit or miss, but for the most part it was ok or unmemorable. It certainly is not as horse**** as it is today. Why? Because we have ceased being consumers, or customers. We are now data and ad revenue. In the blink of an eye they make their money, who cares about us.
    The SELF regulated industry that stealthily sells us? Sure.
    The content provider gets a penny, the other 20 get a dollar, google gets 710 dollars+ per person, per year and I pay over 200 a month for this FREE privilege?
    F*** you.

  • How is it that only ONE consumer concern gets mentioned in this article? Yes we are concerned about “annoying ads” – but we are also concerned about privacy, improving internet security, conserving our bandwidth, and the right to expect taxes to be paid where the profit is earned instead of being siphoned off to tax-havens.

    People like me hate virtually ALL advertising on the internet. Especially search ads as I talk a little bit about here: http://de-aacs.com/adblocking.php

    Google chose to REMOVE the Product Search feature entirely and replace it with “Google Shopping listings” which is just another word for more ads. I was not the only person in the world who valued a fair-go search engine for products. Google removed it – and do they pay any Australian tax on the revenue they earn from Australians clicking though the new “Google Shopping listings”? Of course not. They completely rort the system! How is any Australian advertiser supposed to compete against advertising companies that don’t pay any tax for example?

    Why do you also ignore the fact that Google has a search monopoly as well as an advertising one? They don’t just pay ABP – they pay Maxthon, Opera, and Mozilla to make google.com the default seach engine, instead of say Yandex, DuckDuckGo, Bing, or giving the customer the choice on installation. If this was done outside of the internet it would be in breach of all sorts of competition laws everywhere. Remember how Microsoft was forced to give a choice of browser to install on Windows systems in the EU? The same thing could conceivably be done with search providers as well.

    Could the reason that people don’t block search ads as much be because of the fact they can’t easily distinguish them from the content of the search results? Gone are the days when the ads actually looked different to the search results – on startpage.com the adwords are really hard to tell apart from the real search results.

  • jwan584

    Hey guys,
    Good analysis.

    You are applying the ad block % to all of GOOG’s ad revenues. In reality this should only be applied to PC revenues since mobile is not yet impacted my ad blockers.

    PC is ~65% of revs. So I think you overstated the impact. My est for 2014 based on $26b US ad revs, 65% PC revs, and 7% effective ad block rate (after recovery) is $1.3b loss of revenue.