How the Rise of Ad-Blocking Software Questions Internet’s Business Model

Most of large internet companies are funded by advertising, such as Google and Facebook. In exchange for the provision of some free services (of high value to us, but highly scalable), they use the data collected to target advertisement, with the expectation to increase the advertisement click-through rate hence their revenues.

adblock-plusAdblock software is a response to this, as it blocks ads from showing up on pages. It definitely improves performance. The most successful of these software originated in Germany, which has a fierce data protection approach shaped by a reaction to the years of internal state-spying in East Germany.

While these software remained marginal they were a limited threat. But it tends to grow exponentially, reaching 40% of the users in Germany! (see ‘Ad Blocks’ Doomsday Scenarios‘ by Frederic Filloux) Now it appears that Apple has included one of such software natively in their latest browser (see ‘What the Adblocker debate reveals‘) and that might change significantly the industry. Of course it is a nice strategic coup from Apple to weaken Google, as Apple does not depend on advertisement as a primary source of income. But it nevertheless poses a great threat to much of the internet industry, as the advertising community does not seem to have done anything against it yet.

The balance between intimacy, the usefulness of targeted ads and the economy of internet is still not settled. The next few months will be quite interesting to monitor as it might be that a few cards will get redistributed in the industry!

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