The Problem With Google's War on Annoying AdsBloombergOpinion
(Bloomberg View) -- Google, which controls more than 40 percent of the U.S. digital ad market, has decided to teach the world which ads are acceptable and which aren't. Starting next year, its Chrome web browser will block all ads -- including those bought through Google -- on websites that don't follow guidelines set by an industry group.
This monopolistic move is meant to save the digital ad industry from itself. It would also have the side effects of making Google's business model more sustainable.
Sridhar Ramaswamy, Google's senior vice president for ads and commerce, delivered the warning to website owners in a recent blog post. Chrome, he wrote, won't show any advertising on sites that try to run ads that are designated as annoying by the Coalition for Better Ads, a group that, apart from Google, includes the second digital ad powerhouse -- Facebook, as well as content creators such as News Corp. and The Washington Post and major advertisers such as Procter & Gamble. The group has researched user experiences and concluded that internet users hate pop-up ads, self-launching videos with sound, countdown ads that make one wait before a page loads, and large sticky ads that don't go away as you scroll.
Google is not the first browser maker to build in ad blocking functionality. Last year, Norway-based Opera Software did so, saying it wanted to motivate the industry to stop annoying viewers and increasing website load times. Like Google, Opera also declared it supported lighter ad formats, but didn't pick and choose websites on which to filter out advertising. Now, about a third of Opera users have turned on the blocking feature. But there are too few of them to count: Opera commands a 3.5 percent global market share. Chrome, with 54 percent, dwarfs all other players, and its threat to stop showing ads on certain sites is essentially an order to change or die.
It's not a nice move. Many will see it as a power grab aimed at weakening other players, who are already losing share to Google and Facebook. Content creators could point out that the two giants sell some of the most irritating ad formats, but the Coalition for Better Ads has no problem with them. Instead, it's helping Google wage war on the formats that bring in the most revenue for publishers.
Google founders and executives have built such a powerful company because they've never allowed themselves to get stuck in the present or the near future. And the medium term looks troubling for the digital ad industry because of the quickly growing use of ad blockers. On desktop computers, the use of such software is increasing while web traffic from them is going down. But that's not what should worry Google, whose strategy is based on mobile dominance; on mobile devices, the use of ad blockers is rocketing. In 2016, Google's ad sales increased about 18 percent. The number of mobile devices that use an ad blocker grew 38 percent (to 380 million), according to PageFair. Much of that growth is in Asia, one of the most promising regions for advertisers.
Increasingly, Google and other companies exploiting advertising-based business models are facing a world in which ads are sold, providing a robust revenue stream, but people find ways to opt out of looking at them. That gives fraud -- primarily the practice of "showing" ads to bots rather than real people -- an increasing weight in the industry's total revenues. Google needs to get real people to keep looking at ads, and it appears to believe that making other people's ads less intrusive is the way toward that goal.
I doubt it's going to solve the problem, mainly because the guidelines are written in a way that ensures that viewers will continue to see annoying ads from Google and Facebook -- if not from many other sites.
Google appears to believe that the digital ad market's fundamental contradiction between people's desire for free content and their annoyance with ads is a matter of balance. That belief is apparently shared by some content producers: A few of them have signed up for Google's relaunched Contributor program, which allows sites to charge a small fee -- usually $0.01 per page -- to show a visitor no ads at all. But the program did badly before the relaunch, and very few content sites have signed up for it now. To most readers, paying to see no ads is essentially like paying protection money -- something to be avoided with the help of a comprehensive ad blocker, not a pro-Google, pro-Facebook one.
Content creators, like any other manufacturers, are on shaky ground when people can consume their product free of charge. A strong paid subscription base is the only good insurance against a future digital advertising crisis, which Google is trying to stave off with its attempt to join a trend it can't beat.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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