In Bringing Ad-Blocking to Mobiles, Apple Gives Itself a Boost

Apple Inc’s move to make ad-blocking software available on the iPhone is
a double-barrelled effort to boost the health of the so-called app
economy, while undermining arch rival Google Inc, which dominates the
$120 billion (roughly Rs. 7,97,204 crores) online advertising market.

The new version of the iPhone
operating system, to be released Wednesday, will for the first time
allow customers to download third-party software that strips out
marketing messages such as banner and video ads when people surf the web
via the Safari browser.

A slew of ad-blocking apps for iPhones
are expected to launch this week. But Apple’s new approach will not
affect advertising inside applications such as Facebook, casual games
like those from Supercell or King, or even Apple’s own apps.

Apple is in effect nudging big brands to shift spending to apps, rather than traditional online ads where Google leads.

Ad-blocking
software has been growing rapidly on desktop computers, led by early
adopters among tech-savvy young people, but until now was rare on
mobiles.

Some 200 million people used ad blockers last year, up 40
percent from a year earlier, resulting in $22 billion (roughly Rs. 1,46,154 crores) in lost
advertising revenue, according to a study by Adobe and PageFair, an anti
ad-blocking tech company.

Although only about 5 percent of
Internet users globally use the tools, they are especially popular in
Europe. In Germany and Poland, for instance, the figure is above 30
percent.

Broad adoption of ad-blocking would bring a new set of
headaches for online publishers, many of whom are already struggling
with plummeting ad prices.

Shared revenue
In a nod to
publishers’ concerns, Apple will also on Wednesday launch a new app,
called News, which will allow media companies to bypass blockers to
serve their own ads or let Apple sell ads and share the revenue.

Google,
too, could take a hit from Apple’s making ad-blocking mainstream, if
its own search advertising, as well as the banner ads it manages for
publishers through its DoubleClick unit, were regularly blocked by a
significant portion of web surfers.

Apple has not publicly
explained why it decided to allow ad blockers on its mobile phones, but
Chief Executive Tim Cook gave a hint in June when he criticized internet
companies for violating people’s privacy to boost ad revenue.

“They’re
gobbling up everything they can learn about you and trying to monetize
it,” Cook said in a speech. “We think that’s wrong. And it’s not the
kind of company that Apple wants to be.”

Ad-blocking tools should
help web pages load much faster on mobiles, as they strip out so-called
scripts and trackers that are used to serve up the ads. Some early
pilots have shown media outlets like Vice and the New York Times loading
twice as fast.

Surfing the web with fewer ads will also mean people will consume fewer megabytes of their mobile data plans.

“Ultimately
Apple wants there to be a better consumer experience on mobile and lots
of ads on smartphones are really intrusive,” said Danielle Levitas of
research firm App Annie.

“And there is an added benefit that this move will hurt their competitors more than them.”

Arms race
Media
companies are groping for answers, sparking an arms race between
ad-blocking companies and anti-ad blocking companies such as PageFair
and Sourcepoint that try to disarm the systems for website owners.

Some
like U.S. broadcaster NBC will not allow people using ad blockers to
watch videos on their sites, while newspapers the Guardian and the
Washington Post are prodding people using ad blockers to sign up for
subscriptions.

Apple’s new policy could also force publishers who
don’t already have them to develop dedicated iPhone apps, rather than
relying on mobile-friendly websites.

German broadcasters ProSieben
and RTL and newspaper publisher Axel Springer have filed lawsuits
against Eyeo, the German company that makes Adblock Plus, the most
popular adblocker for desktops. They have lost two early court cases,
although appeals are pending.

Apple’s move will open a new front
in the fight. Eyeo put its free iOS and Android apps on the market last
Tuesday, and others include 1Blocker, Blockr and Crystal.

A
spokesman for ProSieben declined comment on Apple’s move but said the TV
company was “looking into several technical alternatives to bypass
AdBlocker software.”

Roi Carthy, chief marketing officer for
Shine, an Israeli start-up that sells ad-blocking technology to telecom
carriers, said that over time Apple could even try to play an
enforcement role by setting standards for advertising in apps.

“Since
Apple controls what appears in the App Store, it could try to push
developers to clean up the ad formats, to make them lighter or smaller,”
Carthy said.

“But Apple will not cripple ads in apps – they have
an interest in maintaining the ecosystem where the bread and butter is
monetisation via third-party ad platforms.”

© Thomson Reuters 2015