Warning: ad killer on the loose

By Michael Estrin

An ad blocker has emerged from a distant corner of the web, erasing display ads and challenging the current business model. Is it an aberration or harbinger of hard times for interactive? Marketers are split.

When Phil Metzler looks at the internet, he doesn't see the whole picture. Like many web-savvy individuals, Metzler has harnessed an array of Web 2.0 tools to tailor his internet experience. But unlike most internet users, Metzler has taken the individualized internet experience one step further.

Earlier this year, Metzler received a prompt from Firefox to update his browser. When he scanned the list of free plugins available to him, Metzler instantly saw one he liked: Adblock Plus. After waiting 60 seconds to download the application and restarting his computer, Metzler saw something he loved: the web without ads.

"I don't get on the internet to hear sales pitches," Metzler explains. "I abhor the idea of incessant advertising to a captive audience."

Gone from Metzler's sight are the banner ads he has labeled as annoying. Pitches for Match.com featuring alluring singles no longer litter Metzler's MySpace page. Mortgage ads with irresistible rates are absent from his screen. Where banner ads augmented content, Metzler sees only content.

So far, about 2.5 million people have come to the same conclusion as Metzler, and according to a New York Times story, the number of users who have opted to axe ads is growing by several hundred thousand per month, despite the fact that Firefox remains far behind Microsoft's Internet Explorer.

But is Metzler the tip of an iceberg that could sink the digital advertising business or part of an incorrigible few who will always refuse to watch ads? That's a question that divides marketers.

The Interactive Advertising Bureau (IAB) has said it doesn't see Adblock Plus as having a significant impact on interactive for now. But the IAB cautioned that ad blocking in general is "a serious cause for concern."

Kevin Doohan, director of interactive marketing at ConAgra Foods, isn't worried about people like Metzler or tools like Adblock Plus.

"Ads are good; ads will find a way," Doohan says, explaining that the current ad-supported internet model isn't going anywhere. "We have all kinds of ways to reach consumers, so I'm sure we'll find a way to circumvent [Adblock Plus] if we need to."

Doohan's confidence isn't shared by Sean Cheyney, VP of marketing and business development at Accuquote, who agrees that ads aren't going away, but says the interactive industry should be very worried about the emergence of applications like Adblock Plus.

"It's not huge right now, but if it gets greater adoption, I see huge problems for our industry," Cheyney explains. "This is something that could kill businesses."

According to Cheyney, the way the industry deals with ad blocking will be similar to how it dealt with the pop-up.

"When I started at Accuquote, the pop-up was the dominate ad unit," Cheyney says. "As pop-up blockers became more widespread and people expressed their annoyance with pop-ups, we found that the faster we were able to pivot away from pop-ups, the better off we were. A lot of our competitors just weren't able to do that and they didn't make it."

For Cheyney, Adblock Plus also has the long-term potential to kill the internet's ad-supported business model because it could ultimately force publishers to return to subscription content. But it's the short-term that has Cheyney most worried.

With 90 percent of Accuquote's budget dedicated to digital and a huge portion of that amount allocated to display ads, Cheyney's biggest and most immediate fear is that he's paying for impressions that users like Metzler simply aren't seeing.

"What's the methodology that ad servers are using to determine an impression?" Cheyney asks.

That's a question that has so far gone unanswered. The parents of big ad serving companies have remained silent, with only Microsoft choosing to weigh in.

In a statement, Microsoft spoke to the issues raised by ad blockers more generally (IE offers a similar plugin created by third-party developers).

"It would not be appropriate for Microsoft to comment on the merits or demerits of a specific add-on, or group of add-ons," Microsoft said. "Provided they have not been designed with malicious intent and do not compromise a user's privacy or security, Microsoft is pleased to see new add-ons that add to the range of options that users have for customizing their browsing experience."

While some may view Microsoft's position as ultimately siding with users like Metzler, it is worth pointing out that the company exists at the vortex of this controversy. As a technology firm, Microsoft must cater to fickle consumers, many of whom have already ditched the software giant's MSN homepage in favor of Yahoo! and turned to Google for all things search.

But with its emerging ad serving business, Microsoft needs to assure the Sean Cheyney's of the world that ad impressions are not just served but seen. Finally, as a publisher, Microsoft has wagered handsomely on free content, pouring millions into media it hopes will return billions in advertising dollars.

But not all publishers have remained silent.

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Ad blocking turns ugly
Not long after Adblock Plus hit the scene, one publisher struck back at users, accusing them of theft and denying access to his sites via Firefox.

Danny Carlton, who publishes about 50 websites and monetizes his traffic with Google's AdSense, says he blocked Firefox to force larger publishers and ad servers to take note.

"I know it's seen as overkill, but sometime overkill is necessary to expose something that is a growing threat," Carlton says.

While Carlton believes the larger internet companies will eventually take decisive action, he worries that smaller publishers will perish in the meantime. Few publishers have taken the extreme step of blocking Firefox (Carlton claims he's the only one, but in truth there's no way to verify that assertion).

Not long after Carlton blocked Firefox, a Techdirt post labeled the response "stupid."

One well-known blogger, Markos Moulitsas, the "Kos" in DailyKos, has created a voluntary subscription to his popular political blog.

"We won't stop you from using ad blocking software, but if you do use it we ask you to support Daily Kos another way: by purchasing a site subscription," Moulitsas wrote on his blog.

While Moulitsas says he doesn't see ad blocking as a "do something or die" problem for publishers, he does admit that users viewing his site without contributing something to the bottom line "pisses me off."

"I'm confident that if Daily Kos was in that much trouble, the community would respond to help it out," Moulitsas says. "But the site is so far from that point, that I doubt it'll ever be an issue."

A way out of the ad blocking maze?
While some publishers have accused users who employ Adblock Plus of stealing their content, Fred von Lohmann, a senior staff attorney at the Electronic Frontier Foundation, says the real concern isn't legal as much as it's communal.

"Some people will always block ads," von Lohmann explains. "But at the end of the day, this problem exists because people find a lot of ads annoying. If marketers want to solve this problem, they will have to find ways to make more compelling, relevant ads."

Robert Tas, CEO of Active Athlete Media, an ad network for niche publishers focusing on lifestyle sports, echoes von Lohmann's assessment, explaining that respect for the space should be of paramount importance to marketers.

According to Tas, Active Athlete, which hasn't heard any ad blocking complaints from its publishers, has made respect a key component of its business model by thinking like its users.

"We are the audience, so we get the importance of [respecting the space]," Tas says.

Wladimir Palant, the man who started the controversy by inventing Adblock Plus, also sees the issue as one of respect.

"There is only one reliable way to make sure your ads aren't blocked -- make sure the users don't want to block them," Palant wrote on his blog. "Don't forget about the users. Use ads in a way that doesn't degrade their experience."