Will ISPs Get In On the Google Bloodbath?

Posted / 12 November, 2015

Author / Enginess

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A couple weeks ago, we blogged about the emerging conflict between Google and Apple around ad blocking. Now it’s looking like ISPs are also getting into the ad-blocking game.

A couple weeks ago, we blogged about the emerging conflict between Google and Apple around ad blocking. Now it’s looking like ISPs are also getting into the ad-blocking game.

The ad blocking problem

In a nutshell, new Apple updates allow more widespread ad blocking and work to encourage users to use apps instead of internet browsers (which are ad-free). This is going to strangle Google’s cash flow since ads are responsible for more than 90% of their revenue. And to further complicate matters, Google ad revenue is also the engine that drives all sorts of independent websites that produce the content we all love. Therefore, new ad blocking might change the internet in a very big way. So that’s what happened when iOS 9 came out. But since then, ISPs are now getting into the mix.

ISPs blocking ads

A couple weeks ago, the Washington Post reported that some ISPs internationally, like Digicel in the Caribbean, plan to begin blocking ads (and charging advertisers to get through their net). Others, like T-Mobile in Europe, have said that they’re seriously thinking about it. These companies are operating mostly from a user experience perspective because ads are:
  • Extremely slow. The New York Times ran a report that found that on an LTE network, Huffintgon Post with ads took 5.2 seconds and only 1.2 seconds without them
  • They get in the way of the content users actually want
  • They’re cumbersome on mobile screens
  • They’re extremely heavy. According to the same report, 79% of the data being loaded on Boston.com was for ads
Before we congratulate ISPs on their selfless commitment to UX though, they also have something to gain. Without ads, webpages are going to load faster and require less data, which means that ISPs can provide a better service to more people without increasing their expenses by one cent. Basically, it’s an easy way to improve the capacity of their existing infrastructure without actually improving their infrastructure.

Something else worth noting is that the net neutrality laws that were recently passed in the US might actually stand in the way of ISPs adopting ad-blocking policies. Under current legislation, ISPs have to carry all lawful content at the same speed. Ads, however much you might want them outlawed, remain legal content. Therefore, ISPs are perhaps not even legally allowed to block them.

What all this means

With ISPs getting into the ad blocking business, whether it’s recruiting more customers on their ad-free superfast networks or charging advertisers a premium to be allowed through, there are going to be big changes to this fight. ad blocking

First, Apple no longer holds all the cards. The original concept was that Apple would drive people to their own apps and ad networks, cutting off Google’s ad revenue as well as growing its own. But Apple, like Google, relies on ISPs to provide their users with a connection. So now, Apple is in roughly the same boat as Google, albeit in a better position because their reliance on ads is smaller.

Second, the ramifications for small sites remains pretty much as severe as our last report. If small websites and apps can’t generate ad impressions alongside their content, then they’re unlikely to continue to produce all the stuff that makes the internet so much fun. Or, more and more products will move towards a subscription-based revenue model, like The Economist or Netflix. 

Summary

So, is it a good idea for ISPs to block ads? We’re not so sure. For starters, ISPs are unlikely to pass up such a good business opportunity to make money. They’re more likely to charge for ads than to block them outright. Or, they’re going to charge consumers for the right to be ad-free, but again that doesn’t help the independent websites and apps from making money – it just enhances ISP profits. On the other hand, ISPs at least levelled the playing field between Google and Apple, which hopefully alleviates some of the pressure on Google. As we pointed out in our last post on the subject, in a lot of ways Google is too big to fail at this point, so we’d rather they didn’t. Whether ISPs adopt ad blocking in a widespread way remains to be seen. But we think that regardless of who is blocking the ads, there are serious concerns over how it’s going to change the production and access to digital content on a very big way.

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