Facebook’s Key to Conquering the World: Beating the Ad Blockers

As marketers, publishers and users get caught in the crossfire

Facebook is determined to defeat ad blockers. Daniel O'Leary

The most aggressive force in ad-blocking technology is pitted against the world's mightiest social network. The stakes have never been higher for both parties. And there seems no end in sight, as Adblock Plus continues to attack Facebook with the bloody ferocity of a Mongol horde.

Last month, it looked like trouble for Eyeo GmbH, the Cologne, Germany-based maker of the popular ad-blocking software—and tormentor of digital publishers and advertisers everywhere—after Facebook introduced coding that made it impossible to wipe out its desktop display ads. But now, the company is preparing to launch a next-generation version of Adblock Plus (which boasts 100 million users worldwide), making it even more difficult for Facebook to defeat. Or at least it hopes. (Next week, Facebook will find itself on Adblock's turf when the annual digital marketing conference dmexco hits Cologne.)

Facebook has said it is determined to vanquish the ad blockers, working around the clock to bypass their software and ensure its ads are seen by its billion-plus users worldwide. But Adblock and other players including Shine Technologies (whose website proclaims that "ad blocking is a consumer right") are digging in, promising to weaken Facebook's advertising stronghold. "The bottom line is, this doesn't show any signs that it's going to stop anytime soon," says Ben Williams, communications and operations manager at Eyeo GmbH, adding that "there's an infinite number of ways that you can circumvent and work around."

It's just one front in a global attack on Facebook as it chases domination over the worlds of media and advertising—and increasingly bears flesh wounds from an ever-present barrage of slings and arrows from all over the map.

This means war
Facebook got the media world's attention in August when it took a hard-line stance against ad blocking. In putting the ad blockers on notice, it naturally only fired them up. Sure enough, within days, Adblock Plus tweaked its software to break through Facebook's own technology, with Facebook quickly working to seal up the damage.

In all this back-and-forth, Facebook contends that it wants to better understand what kinds of ads consumers like, which, in theory, will help marketers better target their messages. To that end, the social network, aside from updating its software last month, also rolled out new ad-preference tools, benefitting advertisers and consumers by letting users control which ads they see in the news feed. Meanwhile, CEO Mark Zuckerberg and his executive team have sent a larger message to ad blockers and those who use them: Digital content cannot be sustained without advertising.

"Part of the way people can get free content is through the advertising, so that's an important thing to figure out, how to make the advertising available to support the free content," explains Brian Boland, Facebook's vp, advertising technology. "At the same time, you can't do that at the expense of people and their experience."

Adds Dave Grimaldi, evp, public policy at the Interactive Advertising Bureau: "Facebook has threaded a needle that addresses all of the ills that are swirling around this debate. Some people don't like to be targeted so closely, some people do. Others just don't want to be retargeted on the same pair of shoes they've already bought. It seems that this new level of ad preferences addresses all of those things."

But Facebook's anti-ad-blocking mandate also bolsters the argument that it wants nothing less than to rule the interactive experience of us all. If one subscribes to Zuckerberg's vision of the future, the narrative goes, then Facebook will control everything from how we communicate with one another to how we consume news and entertainment to how we watch videos and even access the internet.

And advertising is the underpinning of those grand aspirations. Since 2012, which brought Facebook's historic IPO, its ad revenue has grown from $4.3 billion to around $22.4 billion, per eMarketer.

The battle lines
To be clear, most of Facebook's ads cannot be blocked. Its mobile and desktop news feed-style ads are insulated from ad blockers, leaving only right-hand-rail ads on a desktop screen vulnerable. (Macy's, Verizon and Adobe are some of the brands buying such ads.) But Facebook likely acknowledges that walled-garden luxury may not always exist, as ad blockers have the potential to break into its app. Mobile has become an ever more important business for Facebook. In the second quarter of this year, Facebook brought in $6.2 billion in ad revenue—84 percent of that from mobile.

Yet the damage posed by ad blockers is still considerable. Industry sources estimate the platform's right-hand-rail ads have a CPM of $1.08, with 95.8 billion desktop impressions each month. ReviveAds, an ad-block-prevention tool, calculates that 15 billion ads were blocked in Q2, costing Facebook $32.4 million in lost inventory each month.

Media buyers have issues with Facebook's anti-ad-blocking battle plan. While some sites—Forbes and The Washington Post, for example—ask readers to turn off ad blockers or pay for content, Facebook has not offered such options.

Then there's the issue of ad blockers not working on Facebook, with consumers who have installed ending up seeing ads after all. That, it turns out, is very bad news for brands. "There's a feeling on the buy side that, in general, we don't want our ads served to people who are using ad blockers without disclosing that to the consumer," explains Mitchell Weinstein, svp of ad operations at IPG Mediabrands.

Adds Mediavest | Spark's evp of ad tech and platforms, Oleg Korenfeld: "My question is, who will the user get more annoyed with, Facebook or the actual marketer?"

 

A global assault
There is another issue in Facebook's ad-blocking push. Angering consumers with annoying mobile ads is at the core of the social network's rocky relationship with the telecoms. Last month, telecommunications group Econet of Johannesburg inked a deal with Shine to make ad blocking the default option for 40 million subscribers, initially starting with 10 million in Zimbabwe. Ad-blocking technology will automatically be turned on and people will have to toggle with their phone's settings to see ads on mobile websites and apps. "Our insights show that the majority of our customers would rather have these important controls," says Douglas Mboweni, CEO of Econet Wireless Zimbabwe.

Facebook's relationships with telecoms are complicated globally. On the one hand, tech companies like Facebook that provide over-the-top services such as messaging and video make it easier and cheaper for people to communicate and can often help telecoms attract the users they covet. At the same time, the tech players use the telecoms' "pipes"—the foundation of networks and infrastructure that power internet connections—for free while the telecoms invest heavily in getting regions up to speed on the information superhighway, particularly in developing areas.

As for Facebook, Zuckerberg has traveled far and wide—meeting just last week with Pope Francis at the Vatican—to share his mission of opening up digital access to the world. (More than half the world's population does not have internet access.) Meanwhile, governments have come down on the side of the telecoms in certain cases. The European Union is seeking stricter regulations from Facebook-owned WhatsApp, Microsoft's Skype and Google that would force the U.S-based tech giants to pay to use the telecoms' pipes and abide by additional privacy rules. (In a blow to the ad blockers, the EU ruled last week that mobile ad blocking violates net neutrality, though the ramifications remain unclear.)

In India—a critical growth market for tech companies since only some 252 million of its 1.3 billion residents have internet access—the government has cracked down on programs like Facebook's Free Basics initiative, which offers a complimentary version of its services, over net neutrality concerns. And in South Africa, telecoms MTN and Vodacom are working with the government to set controls on how to charge OTT companies for what they provide. Last week, Facebook revealed plans for a solar-powered drone that will beam down internet access to parts of sub-Saharan Africa. But in a possible setback, a Space X rocket carrying a satellite employed by Facebook to bring the web to developing countries exploded on the launchpad in Florida last week.

"Our argument to Google, Facebook, Amazon and all the big OTTs is that Africa is lacking the infrastructure and the telecom companies have largely been the player that invests in the infrastructure to bring services to almost a billion people," says Herman Singh, group chief digital officer at MTN. "If you're carrying voice traffic, those regulations should apply to all players equally."

Out of MTN's 250 million subscribers, Singh estimates that 60 million have access to mobile broadband, and many of those buy tiny, 10-megabyte data packages. (For comparison, the average U.S. smartphone owner uses nearly three gigabytes of data every month, per NPD Group.)

Therein lies the rub for MTN. Facebook is a crucial partner in helping it build data centers in South Africa to get the country plugged into the internet. But progress remains slow. "If you would ask me how much improvement that we've seen in a year, I would say zero—we probably need to be more aggressive and drive that," Singh says. "My sense is that 2017 is when you're going to start to see the benefits."

 

 

Publishers: Friend or Foe? 

Facebook's troubled dealings with the telecoms call to mind its uneasy relationship with publishers. The revenue that publishers make is getting cut significantly by ad blockers—especially in Europe, where in Germany, for instance, PageFair estimates that 25 percent of readers are using ad blockers. As Facebook's size and scope has grown, relations with such media companies have become more complicated. Publishers rely on the site as a major traffic and data source, while they are beholden to Facebook's constantly changing algorithm, ad formats and policies.

Facebook is also building up exclusive content by encouraging publishers to swap out articles, videos and sponsored posts that drive traffic to their own sites and instead publish that content directly on its platform. "It's almost like there's multiple products within the Facebook platform that keep popping up every six to 12 months that allow us to continue to expand our reach with our audience and content that we produce," explains Joe Speiser, co-founder and CEO of LittleThings, a lifestyle startup that gets 75 percent of its traffic from Facebook. Publishers say Facebook's 16-month-old Instant Articles program, which enables publishers to create stories and posts that live solely on Facebook, are at the center of the social giant's efforts to grab a larger chunk of ad dollars.

Facebook pitches publishers on its supreme reach and user demographics. But making money off that flood of traffic is challenging. With Instant Articles, publishers can either sell their own inventory or serve ads through Facebook's Audience Network (its third-party ad network), with the social net getting a portion of the sale from the latter channel.

According to data from DCN, 90 percent of the growth in digital spending in the U.S. from 2015 to 2016 went to either Facebook or Google, with all other tech companies and publishers left to duke it out over the remaining 10 percent. It's not surprising, then, that as Facebook cracks down on ad blocking, publishers are siding with the social platform. "Facebook and Google controlling the most direct point of contact to the consumer and the underlying economics of the business world at least having data that it is as good or better than the publisher on the same inventory is ultimately what will make publishers fear, not unreasonably, that Facebook and Google together will crush them," says Brian Wieser, an analyst at Pivotal Research.

So, it makes sense that publishers' relationships with Facebook are a bit of a double-edged sword, and as their own moneymaking efforts hit up against the social platform's goals, some are wary of giving up too much control. "Once you start to see the audience it's creating, you start to look at, OK, how can I continue to justify and make money off of this?" says Jason Kint, CEO of Digital Content Next. "And that creates the tension, so I think you're seeing a bit of that in the past six months."

A new path? 
One way publishers are attempting to escape Facebook's shadow is by teaming up with other publishers to create data co-ops and initiatives. "It's not about getting rid of your reliance on Facebook and Google entirely," explains Alan Chapell, head of the marketing consultancy Chapell & Associates. "Rather, it's about attempting to find other sources of traffic and revenue so that you are less reliant on Google and Facebook."

Big fish across the pond are trying to find such traffic sources. For example, Axel Springer, one of Europe's largest publishers, is working with a consortium of German news outlets to combine data about its readers into a platform called Emetriq. The idea is to build a repository of consumer data marketers can use to target and buy ads as an alternative to Facebook or Google.

"I think this is a trend all around the world—you can team up with others and kind of share data," notes Christoph Keese, evp of Axel Springer.

Hayley Romer, svp and publisher of The Atlantic, says her team is "starting to see more revenue from that platform," adding that "it's necessary for us to have people who understand in real time the changes that Facebook is making."

Other publishers like Evolve Media are more defiant.

"We made a decision a long time ago not to go all-in on Facebook, because we had predicted that they would change the rules of the game as they sought to grow revenue and profit," says Evolve Media president Brian Fitzgerald. "Publishers that are basing their audience and video-publishing strategies on Facebook are going to find in the years to come that they have only empowered Facebook with consumers and advertisers to their detriment."

Fitzgerald isn't alone in his fear of Planet Facebook, or at the least a global Facebook-Google duopoly. "If Facebook and Google have way too much leverage, then how can it be a fair marketplace for the advertiser?" says Mediavest | Spark's Korenfeld.

The irony of Facebook fighting the likes of Adblock Plus that use white-listing tactics requiring publishers to pay in exchange for unblocking their ads—essentially forcing publishers and agencies to play by their rules in an ecosystem that they control—isn't lost on Korenfeld. "They're kind of creating their own version of the same thing," he says.

As for the conflict with ad blockers, Facebook, with its tremendous scale and rich bankroll, would seem to be in a position to continue this fight for as long as it takes. "They have incredible resources to do it, in terms of engineers, and they also have a deeper tech-stack capability," notes Scott Symonds, managing director of media at AKQA. Surely Facebook's massive resources trump whatever startups have to invest in ad-blocking technology.

But might it risk alienating its most important ally of all as it battles to the death with the ad blockers?

"Even if Facebook can fight [ad blocking] technically for their own site, it only benefits Facebook," argues DCN's Kint. "At the same time, Facebook collects as much data as probably anyone across the web and participates in the overall ad-tech ecosystem. That's a problem with consumers."

This story first appeared in the September 5, 2016 issue of Adweek magazine. Click here to subscribe.