Will Wireless Carriers Really Kill Mobile Advertising, or Is It Just a Bluff?

One switch and it all goes kablooey

Roi Carthy is ready to flip the switch that blows up mobile advertising. His company is threatening to hand a nuclear option to wireless carriers that would eliminate most mobile ads that make money for big tech companies, especially Google.

This is a huge deal with significant money at stake, but is it a bluff?

Carthy's company, Israel-based Shine Technologies, claims to have the ability to turn off ads by working with wireless carriers. It also claims to have the support of a few overseas telecoms, which would love to stick it to Google.

The mobile "bomb" threat was recently revealed in a Financial Times report that said unnamed European carriers were ready to work with Shine. However, none have come forward publicly yet to admit they would strangle the livelihood of so many Internet companies—not just Google, but AOL, Yahoo and others that depend on delivering ads to smartphones.

For his part, Carthy said he's deadly serious, and that the technology works, blocking video, display and banner ads from crossing telecommunication pipes.

"It is a high-stakes game, but when you boil it down, from the perspective of Shine, it's quite simple: Consumers deserve to choose if they want ad blocking or not," Carthy told Adweek in a recent phone interview. "We believe that is a right."

Shine claims to be working with carriers to install its boxes at data centers that filter ads out of Internet traffic. Carthy said YouTube pre-roll video ads could be eliminated, while Facebook sponsored video posts would continue to find access, as would Hulu commercials.

That's part of the controversy. Shine and the carriers would decide which ads are allowed—what's acceptable and what's not. Carthy said native-style ads, like those that appear on Facebook and Twitter as sponsored posts, are OK, while other formats are not.

One argument is that ads sap bandwidth from carriers, but then again so do sponsored social media posts and all other content.

A growing percentage of desktop users has started employing ad blockers, leading to serious concern in the industry. There are more than 150 million Internet users that deploy ad-blocking software, according to recent stats. The blockers are quickly becoming an issue in mobile, according to industry watchers.

AdBlock Plus, an easy fix for people who want to kill ads, is developing its first iPhone app. And today it began testing a blocker for Android phones, the operating system owned by Google. AdBlock Plus has reached out to the online ad world to define "unobtrusive" ads, which it will allow users to see. In some cases, Internet companies reportedly pay AdBlock Plus for its services—and the ability to show certain ads to Web users who install the software.

What's the motivation?

Anti-ad groups claim users prefer plain, text-based ads. Meanwhile, the industry is moving toward promos with more motion, gloss and impact, including videos and cinemagraphs.

"Consumers have reached a point where they feel saturated with ads," Carthy said. "They are dissatisfied with the way current advertising works."

Internet companies, the ad industry and publishers say there is no alternative to an ad-based model that would support all the free content they deliver.

Meanwhile, Shine's gambit is seen by some as a ploy to get companies like Google to pay carriers to use their infrastructure to deliver ads. Carthy admits that's one possible outcome.

However, here's what Google had to say: "People pay for mobile Internet packages so they can access the apps, video streaming, Web mail and other services they love, many of which are funded by ads," the company said in a statement to Adweek. "Google and other Web companies invest heavily in developing these services—and in the behind-the-scenes infrastructure to deliver them."

Roadblocks for anti-ad movement 

Most ad industry players don't think Shine Technologies and the carriers could get away with blocking ads in any comprehensive way. Net neutrality rules prohibit Internet providers from manipulating traffic to play favorites, providing an advantage to some while hindering others.

"Carriers can't block ads on their network. At least, they are not allowed to do so," said Frederic Montagnon, CEO of Secret Media, a tech company that helps publishers find solutions to anti-ad software. "What they can do is push their users to [download ad blockers]."

Eric Franchi, co-founder of mobile ad network Undertone, doesn't think any big telecoms will employ Shine's technology.

"I find it hard to foresee that a major carrier will deploy an ad blocker. It would essentially be taking revenue out of the pocket of media and ad companies," Franchi said. "You could imagine a scenario where those companies would then restrict access to content, which would then anger the customers of that carrier."

Carthy, however, said the technology is very real, and the carriers are very eager. He claimed at least one wireless company would roll out the technology "fairly soon."

"This is simply progress, and we're unapologetic about it," he said.