If ad-blockers threaten revenue, then what’s the solution?
As consumers increasingly use software to block online ads, are we seeing the early signs of a fundamental shift in our relationships with brands? Here, GfK's Colin Strong looks at the latest consumer research and asks if the Internet's leading business model is going to be turned upside down.
The Internet's business model has, of course, long been based on online advertising revenue - a increasingly important revenue stream for publishers and other media companies. There is, however, some debate about the degree to which this revenue is threatened by consumers taking steps to block ads.
And perhaps more importantly, is this the activity of a small band of tech savvy individuals or the sign of a growing trend that will fundamentally turn the internet's favourite business model on its head?
The size of the population that take steps to block ads is of a matter of some debate. At one end we have the rather sobering findings from PageFair, a company that helps sites detect when their sites are being blocked, who say that of the brands they work with, 22.7% of their visitors are blocking sites.
In some categories of site this can be as much as 43% of visitors. Some caution should be exercised however, as this is based on sites that are using their services and may have self-identified a problem.
An estimate from another company that operates in this same area, Clarity Ray, states that just under 10% of online individuals were engaged in some form of ad blocking. And whilst this may sound relatively low, there is a lot of variance with tech sites, at an average of about 18%, suffering the highest rate of blocking.
So what are brands to do? Of course the debate about generating revenue from paywalls is alive and well as Ryan Garner has recently discussed on these pages. But are we possibly seeing the early signs of a fundamental shift in consumers' relationships with brands? For as advertising uses ever more personal data to improve targeting, consumers are starting to get concerned.
In a recent study we found that 86% of consumers would like to have more control about the way companies use their data. It's clear that there has not been sufficient discussion or exploration of the consumer acceptance of personalised marketing communications or indeed to bespoke customer experiences.
The debate has been polarised. On one side we have brands and the advertising industry, and on the other side, privacy pressure groups. Our data suggests that for many consumers there is a limit to the extent to which they are willing to accept personalisation.
Just as robotics expert Masahiro Mori first suggested in the early 1970s, perhaps there is an 'Uncanney Valley' where automated systems get too human like and leave us feeling 'creeped out'. If we accept this premise then there comes a point at which targeted advertising ceases to improve in effectiveness and consumers get turned off.
And this is perhaps an indication that a new era of Vendor Relationship Management (VRM) may start to replace the current authority of Customer Relationship Management (CRM). This is a world in which consumers are actively managing their relationship with brands rather than being the passive recipient of advertising. The term for this shift, created by academic and commentator Doc Searls, is the Intention Economy.
In the Intention Economy consumers take responsibility for holding their own data about themselves in personal clouds, collecting it from a variety of government agencies and brands - which forms a fundamentally new value exchange between brands and consumers.
So consumers are placed firmly at the centre of their own personal data, being able to collect and integrate it from a multitude of different sources. Consumers may choose to provide brands with selected parts of this data when they wish to engage with them on a purchase decision.
The compensation for brands is that they have hugely rich data sets on consumers not just based on the information that they themselves hold but across the repertoire of relevant brands. So a Pay TV brand may not only be able to see viewing activity that the consumer has with them but also be able to see activity with OTT services, their online browsing information, their Amazon purchase history and maybe even their grocery shopping.
On first reading, this potentially sounds interesting, yet fanciful. But before dismissing this too quickly it's worth noting that the UK is one of many countries that has passed legislation enabling the government to force companies to hand over the data they have on individuals in a 'transportable, machine readable format'.
We have effectively been assuming that all consumers are the same in their acceptance levels and that it's simply a matter of getting ever more intelligent in the way in which the advertising is personalised.
This is looking like an increasingly unlikely scenario; consumers vary in their capacity for personalisation, there are limits to the degree to which you can make advertising relevant without consumers sharing data about themselves and underpinning all this is the uneasy feeling that we all seem to get when things get too close to the bone.
But before we get to this point we need to have a much better understanding of the way reactions to advertising play out by consumer segment, market category, media and so on. And it's also worth taking a closer look at the Intention Economy - it may take some time and the manifestations may not be what we expect but that may well be the landscape we find ourselves in.
Colin Strong is managing director, NOP business & technology, GfK.