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As Ad Blocker Usage Explodes, Can YouTube Win Back Scofflaws With a Subscription Model?

Users revolt against pre-roll

Many Internet users hate ads, but only 2 percent are reportedly willing to pay the cost covered by advertisers. Photo: Getty Images

It's not a mystery why YouTube is considering offering an ad-free version of its site to paying subscribers. Thanks to ad blocking software, there already are millions of potential viewers who pay nothing for an ad-free experience, and it makes sense to test whether these digital freeloaders would be willing to pay if they had a subscription-based option.

Ad blocking is a growing concern in advertising—right up there with viewability, fraud and piracy. The number of people using ad-blocking software, including Adblock Plus, AdGuard and uBlock, is rising. And some industry watchers say the phenomenon is related to an increase in video advertising.

"A lot of people blame YouTube for ad-block usage," said Zack Sinclair, CEO of FairBlocker, an ad-blocking software firm. "Display ads are easy to ignore. On YouTube, you see exactly how much time is being wasted."

Ad-blocking consumers can also avoid commercials on news and entertainment websites and on digital TV platforms like Hulu, killing banner and pre-roll video ads alike.

Spending on digital video advertising increased almost 60 percent in 2014 from the previous year. During the same period, the number of Internet users using ad blockers rose from 54 million to 121 million. Today, almost 150 million people have downloaded ad-blocking software, according to a frequently cited report from PageFair and Adobe.

Digital advertising is a $60 billion a year business in the U.S., where more than 25 percent of the Internet population has ad blockers, according to some estimates. Now, the industry is trying to persuade consumers to pay for content or convince them that advertising is necessary.

YouTube has its subscription model in the works, according to reports. YouTube did not return a request for comment. Google also is developing a contributor network, currently in the test phase, which lets users pay for an ad-free experience with participating publishers.

FairBlocker, which launched in February, allows subscribers to pay to see the content they want without ads. Sinclair said the company has about 50 customers who pay up to $15 for every 1,000 views on websites they visit.

Frederic Montagnon, CEO of Secret Media, a tech firm that helps publishers circumvent ad blockers, is unconvinced that user payments could make up for lost ad revenue.

"What I don't understand, actually, is that today, for someone using ad blocking, they don't see any ads, so they won't see any reason to pay YouTube—or anyone—to prevent being exposed to them," Montagnon said.

Only 2 percent of Internet users would be willing to pay the cost covered by advertising to access information online, Secret Media says.

Each U.S. Internet user is worth more than $215 a year in digital ad revenue, according to eMarketer stats. However, ad-blocking users are likely much more valuable because they are typically heavy Internet consumers, Montagnon said.

He estimated that the average user would have to pay Google about $60 a year to make up for lost revenue if they opted out of seeing ads. Some ad-blocking users could be worth 10 times more than that, he said.

The blocker software works by either preventing networks from serving ads or simply hiding the ads after they've been served. Ad-free advocates often know they are stifling the business of the sites they frequent, but the temptation is great.

"I first began using AdBlock primarily because of YouTube. Before every movie trailer, every music video, every episode of Crash Course and every 90-second cat video, I had to watch a minute-long advertisement," wrote ad-block user Ian Evans in a recent blog post. "Sometimes I could click past it after 30 seconds, but increasingly, I couldn't. Sometimes it was longer than the video itself."

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