Facebook’s hackproof ads turned its adblocking problem in to a $709 million revenue stream.

Dr Johnny Ryan Adblocking Leave a Comment

Four successive quarterly reports show the year-over-year revenue growth that Facebook attributes to showing ads that adblock companies are unable to hack. 

While many websites prevaricated, Facebook figured out how to turn its adblocking problem in to a $709 million revenue stream by serving ads that were immune to adblock.

Both online giants, Google and Facebook, have concluded that showing ads to adblock users is the right way to tackle adblocking.

In mid Q3 2016 Facebook implemented  tamper-proof ad serving that adblock companies can not hack. Eyeo, which owns Adblock Plus, has attempted at various times to introduce hacks to break this system, with partial results for brief periods. Nonetheless, Facebook’s quarterly earnings figures reveal that it has netted nearly three quarters of a billion dollars as a result.

Click here to view data sheet (including quotes from Facebook CFO from each quarter, and links to Facebook reports for each quarter).

Four successive quarterly earnings reports now show the year-on-year revenue increase that totals $709 million from mid Q3 2016 to Q2  2017. Q2 2017 is the last quarter in which this year over year growth is evident, because Q3 2016 already includes an adblock revenue bump. Comments from Facebook’s CFO from each of these earnings calls are in footnote 1.[1]

Growth, despite desktop decline

This revenue is entirely generated by Facebook’s desktop service. This is all the more remarkable because Facebook’s revenue has been shifting from desktop to mobile for several years. The chart below shows the decline from mid 2015 to mid 2017.

As Facebook’s CFO, David Wehner, said in the Q4 2016 earnings call, “desktop ad revenue grew 22%, despite a decline in desktop usage, helped by our efforts to limit the impact of ad blockers on advertisements served on personal computers”.[2]

The holy grail for websites

In 2015 Facebook warned investors that “if [adblock] technologies continue to proliferate, in particular with respect to mobile platforms, our future financial results may be harmed”.[3] By mid 2017 it has reversed the situation to make $709 million. All websites can emulate this strategy. Facebook shows that websites can convert the adblock audience from a revenue threat to a revenue generator.

This corresponds with experiments with publishers over half a decade of tackling adblock, which have taught us that tamper-proof ad serving works best. At present PageFair protects over 2 billion ads per month, enabling websites to serve advertising in a way that adblocking companies can not hack.

However, there is an important caveat. The adblock audience must be treated with respect. Adblock users have legitimate grievances with advertising. Our study of 4,626 users in 2017 showed the primary problems to be privacy, UX, security, and bandwidth.[4] It was necessary for Facebook to take steps to address some of these issues before implementing tamper-proof ad serving.[5] Similarly, PageFair enables publishers to automatically convert their normal ads into IAB LEAN / Coalition for Better Ads compliant formats that address user concerns about ad UX, security, bandwidth, and privacy.

A PageFair/ISBA/ARF study with 2,300+ participants showed that this creates a monetizable adblock audience that has an identical level of satisfaction with its web page experience that regular have, and that is at least as favourable to advertised brands.[6]

While we at PageFair enable some clients to restrict access to content to adblock users, these are generally very large US TV networks with exclusive TV shows that users can not get on other sites.

The Facebook example makes clear what we have learned from our clients experience: most sites are best served by using tamper-proof adserving. That is, provided they serve only IAB LEAN / Coalition formats.

 

Notes

[1] Comments by Facebook’s CFO in earnings calls

[2] Facebook Q4 earnings call, 1 February 2017.  See transcript.

[3] Facebook Q4 and Full Year 2015 Earnings, 27 January 2016 (URL: https://s21.q4cdn.com/399680738/files/doc_presentations/FB_Q4_15_Earnings_Slides.pdf).

[4] See results of survey of 4,626 users in “The State of the Blocked Web”, PageFair, 2017, pp 12-14 (URL: https://pagefair.com/blog/2017/adblockreport/).

[5] Andrew Bosworth, “A New Way to Control the Ads You See on Facebook, and an Update on Ad Blocking”, Facebook statement, 9 August 2016 (URL: http://newsroom.fb.com/news/2016/08/a-new-way-to-control-the-ads-you-see-on-facebook-and-an-update-on-ad-blocking/).

[6] See survey of 2,300 users in “Brand safety and the unblocked web”, PageFair, ISBA, and the Advertising Research Foundation, pp. 3 – 4 (URL: https://pagefair.com/blog/2017/brand-safety-and-the-unblocked-web/).