No winners with ad blocking - it threatens media owners, ad agencies and consumers

No winners with ad blocking it threatens media owners

Ad blocking is just the latest manifestation of a conundrum for both media owners and content consumers.

Also on KPMG.com

Ad blocking is just the latest manifestation of a conundrum for both media owners and content consumers. KPMG’s Media Tracker research confirms that web and mobile users don’t want intrusive ads, and won’t pay for much of what they’re reading or viewing; a new approach is needed.

Digital consumers are increasingly deploying ad blockers on web and mobile – and younger, more affluent users are the most ready to use such technology. The survey of 2,072 UK adults found that 47 per cent of high earners say they’ll be using an ad blocker in the next six months, compared with 43 per cent for low income groups. That’s also true of 59 per cent of 18-24 year-olds, with the lowest proportion of expected ad blocker users among the over over-65s, at 36 per cent.

With the most important demographic groups for media businesses and advertisers alike opting out of digital advertising, publishers such as Forbes, CityAM and the New Statesman, are turning off content for browsers where an ad blocker is detected. Some of the biggest properties in digital media, including the Guardian, are also considering this step to protect revenues. 

The survey findings are, however, worrying even for these braver companies holding the line against revenue erosion. The Media Tracker shows that 92 per cent of UK households are unwilling to pay a monthly fee for ad-free browsing. Worse, among the 8 per cent willing to pay, 26 per cent would be willing to stump up a mere £1 per month; 31 per cent of respondents said they would spend between £1 and £3 per month for an ad-free experience; and just 16 per cent of people would pay between £3 to £5.

According to David Elms, UK Head of Media for KPMG, this is yet another dilemma for media companies as they seek to find a business model to successfully monetise their content online.

“Turning off content for those that have ad blockers is self-defeating for media owners and can, at best, only be a short term strategy. Too many people still seem to think that they can consume content for free. But there’s no such thing as a free lunch in content. People are refusing to watch ads, but they show no inclination to pay for many forms of content - and that’s clearly unsustainable. It demands a fundamental re-examination of marketing strategy for major advertisers – and business strategy for media owners,” Elms says.

There are some causes for optimism. Micropayments – long held out as a saviour for online content – finally seem to be coming to fruition with experiments such as Google’s Contributor, though this model remains unproven. In addition, the success of streaming video services such as Netflix, Amazon Prime Video and NowTV (all ad-free platforms) suggests the consumers will pay for compelling content.  

Elms said: “The solution has to be for media owners, their ad agencies and their technology providers to deliver ads in a consumer-friendly way that is less intrusive.”

Solutions are important as the survey shows just how much consumers dislike ads. When offered the option of being paid to view 50 per cent more ads while browsing, two-thirds (65 per cent) of households said they would not.

“What’s needed is a deeper strategic look at the way brands and media properties engage with consumers and how that’s monetised. While this is a big issue for media owners, it is also critical for the advertising agencies. How do they get simple, compelling messages for their clients to their markets as media channels become increasingly fragmented?” says Elms.

“Ultimately, consumers need to either learn to accept an ad or pay not to see it. The solution seems to be the middle ground. When ads become more sophisticated, less intrusive and even more targeted, ad blocking will become far less significant. Until then, the picture will only worsen for media owners, advertisers and consumers themselves,” concluded Elms.

ENDS

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Notes to Editors:

About KPMG

KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff.  The UK firm recorded a revenue of £1.96 billion in the year ended September 2015. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 174,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.

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