Tuesday, March 23, 2010

Adblocking

Green Armadillo said using adblockers is an issue of trust, as allowing scripts (needed to track ad clicks and views) practically allow the site to do anything with your computer, including inserting viruses. Even trustworthy sites can be hacked and used as virus hives. While being cautious is a good reason to block ads, trusting in the site is still not a good reason to block ads. I block ads everywhere possible and suggested the same.

The article he refers is just pathetic. The site noticed that 40% of their reader base block ads. Their arguments are mostly lies like "Imagine running a restaurant where 40% of the people who came and ate didn't pay. In a way, that's what ad blocking is doing to us." It's a lie because most of the costs of a restaurant are variable: creating your meal cost them raw materials and worktime of the cooks and waiters, and you also occupy a table so other people can't come in. On the other hand the website costs are 99% fixed, if you created the content for 1 person, you created it for 10000.

Other "arguments" are just QQ: "It can result in people losing their jobs, it can result in less content on any given site, and it definitely can affect the quality of content. It can also put sites into a real advertising death spin. As ad revenues go down, many sites are lured into running advertising of a truly questionable nature." or "many people do not think about the people, the families, the careers that go into producing a website". Oh, the cruel world, I'm almost crying.

But instead of just stating the obvious "thanks I already got your content, so I can't care less if you bankrupt tomorrow as someone else will provide me content", let me analyze the whole internet marketing (ad) system and prove that despite they claim otherwise, their business model sucks.

Let's see the way of the money in the standard ad-supported media:
  1. User consumes content that cost money to the publisher to produce
  2. User views ad, the ad-agency pays the publisher
  3. Ad-agencies are hired by companies to advertise their product
  4. The whole point of advertising is to increase sales. The idea is that the viewer of the ad will more likely buy the product of the company, than a non-viewer would. If it's true, then money will go from the pocket of the user to the company.
Step 4 is the crucial. The producing companies would still have sales without internet marketing, assuming they produce something worth buying. So "I go to the car dealership and buy car" can stand on its own, without the advertising industry. All other can only exist as accessory of this. If we assume that all companies in the scheme are profitable, the money coming in for the system comes from the "user". Lets see where his money goes:
  • to the producing company to produce the item without marketing
  • the profit of the producing company
  • the marketing cost of the company (divided by the amount of items sold). This cost includes:
    • the running costs of the ad-agency (staff salaries, bandwidth, electricity, taxes, office rent)
    • the profit of the ad-agency
    • the money they pay to the sites that display the ads, consisting
      • the costs of producing content
      • the profit of the content provider
So I pay all these and receive a product and internet content. But what if I will never buy the product? This case the ad was not "properly targeted". It did not increase the income of the producer, so the marketing costs were wasted. This case if I do or don't see the ad does not matter. The idea of tracking views instead of sales (like in affiliate marketing), is that the targeting chance is not the function of the person himself. If I see the ad, I have X% chance to make a purchase, depending on random factors like do I already own this or competitor's item, do I have money and so on. However it's absolutely not true.

Let's compare the above cost scheme to a scheme where someone buys both the content (via paid subscribing) and the product without advertising. This case the buyer pays for
  • to the producing company to produce the item without marketing
  • the profit of the producing company
  • the costs of producing content
  • the profit of the content provider
He received the very same things as before, obviously cheaper, plus his content consumption was not obstructed by annoying ads. So rationally, he should choose this option. If he chooses the more expensive and annoying way, he is an idiot. And this is the core idea of the whole advertising industry: people are morons. The well-created advertisement can somehow trick their brain to do something really stupid: buy something that has its price increased by advertising and content-producing costs at best and completely useless to him at worst.

However the business model where views and not sales are tracked are based on the incorrect generalization of the core idea: since everyone are morons, more views = more sales. Well, not everyone are morons. I regularly see huge car advertisement posters by the road between my work and home. I had money and I wanted to buy a car, so they were perfectly targeted ads. Yet I did not buy any of the advertised cars, as I bought a used car. It is in good condition and cost 30% of a new car. What happened? The posters shown either sexy girls or happy families by the cars and I'm not a moron to believe that a piece of metal can gets me either.

Of course you can claim that there is no effective moron-detector, so the market shall still be carpet-bombed, as 2x more views means 2x more morons reached (and 2x more intelligent people). However it's not true! The existence of the ad-blocker is a proof that the person is not a moron (or at least not on this field). Installing the ad-blockers is the internet version of the sign "traveling salesmen don't bother me, I won't buy your crap" placed in your garden. It actually helps the ad-agency to target their ads better, preventing wasting money by paying content that does not get them enough morons.

Of course there is a reason why the linked magazine wrote their "nice ppl plz plz plz don't block our ads": they don't want the ad-agency to know that the ads on their site are pointless, as most of their readers are not morons. However it cannot work, and not only because the "plz plz plz" is rarely a good business model. Either the ad agencies will figure out that advertising on intelligent sites does not make enough sales, or the producers will figure out that the sales increased by advertisements are not enough to support the marketing costs. One way or another, the completely wrongly targeted ads will disappear.

So the ad-supported content can only work if the content draws morons. The producers of intelligent content can either be truly free (like this site) or can be paid by subscription fees.


PS: forcing users to not block ads does not work. It would just make someone create an adblocker, that downloads the ad and run the scrips, but hide them from the screen, consuming more bandwidth for absolutely nothing.

26 comments:

Daniel said...

I agree with a lot of what you said, with one minor disagreement, regarding the "create content for 1, create content for 10,000."

In "smaller" scale sites, such as mine, yours, and other sites, this is true. But, for example, Blizzard doesn't pay the same for web hosting that we do.

Neither does Ars Technica, Smashing Magazine, or any other site that generates hundreds of thousands of views a day. Bandwidth does end up costing more money the more viewers you get. Regardless of *how* they pay those bills, those bills do have to be paid and it costs much more than what you or I are paying.

Anonymous said...

I think you underestimate the impact advertising can have on even intelligent people. It is not that people see the ad and rush out to buy the product the next day, it is more about making the consumer aware of the product and making a positive association in the consumer's mind with that product. No one thinks 'if I buy that cigarette brand then I will get hot girls'. but they do experience 'positive' emotions when seeing the girls. those emotions can the become subconsciously associated with the product and the next time that person wants to buy cigarettes he sees that brand and he is drawn to it.

Mikk said...

Too bad that it doesn't block flash ads.

Pangoria Fallstar said...

Funny reading this after listening the last few weeks to TWiT podcast. New York Times is trying to go the way of subscription model on the iPad. The hope is that people will pay to get the news. Problem is that the NYTimes is syndicated, and so those articles are showing up on the websites of local papers for free.

I thought I'd share this, and maybe you can listen to the podcast and see what you think of that.

www.twit.tv

Inquisitor said...

Advertising provides a potentially valuable service: It informs you of the existence of a product of which you might remain otherwise unaware.

At that point, supposing the utility of the product to you is substantially greater than the retail price, you have offset considerable lost utility from viewing advertisments.

Now, within your direct area of interest, you should remain aware of relevant developments (advertising for Cataclysm, say, isn't going to inform you in this manner) - but outside that? Let's say I'm in an unfamiliar city on business, and need to get about - and the advertising is for an unusual form of public transport (this actually happened to me in San Francisco).

It's a potentially positive value, even for rational people, who extract only the information content from advertisments. *And* it is providing value to the advertisers.

Hagu said...

"On the other hand the website costs are 99% fixed" is only true for creating the content. In massive quantities, bandwidth can get expensive. If traffic increases enough, more servers and routers need to be purchased. Look at youtube; the content is provided free to Google, yet Google spends a fortune on the servers and bandwidth to send it to end users.

People are morons and much advertising preys upon them. But not all. If you have a new product: Sony walkman, iPod, iPad, Prius electrical car, then nobody is currently buying it. So without something, call it ads or marketing or PR, people would not know about the new product.

Take a factory with fixed costs of $1000/month and they can produce a widget with a variable cost of $1. If without advertising, they would sell 100, then break even is $11 per unit. If by spending $200 on advertising, they could sell 300 units, then break even is $5/unit. The advertising *lowered* the cost to the consumer. Since Texas Instruments made the "learning curve" famous in the 1960s, a lot of business focus, especially for things that involve semiconductors, has been on getting volume up to get further down the learning curve to get costs down to increase volume ... Advertising helps that.

Foo said...

This is even more moronic than 'plz plz be nice'. It is more akin to 'plz plz be nice so I dont have to think'. In technical terms, this involves using a 'reverse proxy' to mix and merge adverts with content, making it appear to be from one source, along with choosing ads with a similar format to the original content.

As an example:
Standard website with adds served 'remotely hosted'
A website with ads blocked by your standard addblocker works metaphorically like this.

A reader goes to a librarian and asks for a book. The librarian gets your book (website content), gives it to you, and asks that you please go talk to that 'advert librarian' over there. If you choose to do so (as web browsers by default do) the 'advert librarian' gives you a dodgy looking package full of adds. Sometimes the package is full of 'nasty things' which are generally bigger than the book. Readers who either (a) dont want adverts or (b) dont want 'nasty things' may choose not to visit the 'advert librarian' by installing an ad-blocker.

Website with adds served 'embedded'
A website with ads allowed by your standard addblocker works metaphorically like this.

A reader goes to a librarian and asks for a book. The librarian gets your book (website content), goes to the 'advert librarian' and gets brochures. They put the brochures in the book at various pages, then gives you the book and adds. Sometimes the ads are full of 'nasty things', but the librarian has chosen the 'embedded ads' with at least some care. Readers who either dont want adverts are mostly out of luck as the ads and content appear similar at first glance. Readers who dont want 'nasty things' may still choose to 'reject' large inserts in their book by installing an ad-blocker.

In a real life example: Google uses ads that are 'embedded'. No one cares, and google gets both it's links and it's money.

Green Armadillo said...

"Either the ad agencies will figure out that advertising on intelligent sites does not make enough sales, or the producers will figure out that the sales increased by advertisements are not enough to support the marketing costs."

And that appears to be basically what happened to prompt this whole discussion.

Part of the perspective here is that the business model used to be much more focused on "site gets paid when someone clicks on an ad and buys right now". That model got changed, partially cause of "web 2.0" "targeted ad" mumbo jumbo, and partially because there are things that people want to advertise that they're not going to buy immediately from some website (e.g. cars). If companies want to waste their ad budgets, there's no reason why site's producers shouldn't line up to take the money, but they shouldn't be any more surprised when the other side wises up.

That said, my personal opinion is that the site in question does produce content that is better than the average tech site, and not as easily replaced by someone else tomorrow. I don't know how you solve that problem once marketing departments stop wasting their money, though. The amount of money that I'm prepared to spend on any one site on the internet is way less than the amount of money Apple is willing to spend trying to convince people to buy luxury computers.

Anonymous said...

I agree with your assessment; the article is indeed pathetic. This is coming from someone who makes revenue via advertising and affiliate marketing. Someone who actually makes money by providing a service of value to the consumer (for example, by making it easier for them to find a product they are after). Or by exploiting the click-happy idiotic part of the user base in some cases.

The restaurant analogy used in the linked article is terrible. Not just because of the variable cost as you mention, but because when you go in to a restaurant, you're making an offer to buy a service/goods which is accepted, thus forming a legal contract.

By simply clicking on the link to a website, there's no such contract. There's no obligation to pay them, or indeed do anything.

Since pay-per-impression advertising is rarely used nowadays due to the low performance (cost-per-action is dominant - clicking through to the advertised site, signing up for something on said site, or making a purchase for example), they would only be losing revenue if the people blocking these ads would have clicked on them and performed the specified action.

And as you correctly point out, the kind of person who blocks ads is extremely unlikely to click on them; they've even rejected them entirely (hence why they've blocked ads!). Or at least the typical, intrusive kind of advert that you often find on the Internet that provides absolutely no value whatsoever.

"The well-created advertisement can somehow trick their brain to do something really stupid: buy something that has its price increased by advertising and content-producing costs at best and completely useless to him at worst."

Ideally the company running the advertising campaign would like it to be so effective that the customer pays for the overhead himself, this isn't always the case; the retailer sometimes accepts a lower profit margin (or even sells the item at a break-even cost or at a loss) with the aim of cutting the middle man out of future transactions.

There's also the rationale that a 5% profit margin is better than a 0% margin due to the sale not coming in in the first place.

Casey said...

The whole industry is set up to make people want what they don't need, or to decieve people into believing that a certain product is the answer to their dreams.

To quote the mighty Bill Hicks: "By the way if anyone here is in advertising or marketing... kill yourself."

Anonymous said...

" forcing users to not block ads does not work. It would just make someone create an adblocker, that downloads the ad and run the scrips, but hide them from the screen, consuming more bandwidth for absolutely nothing."

But then the site still gets ad revenue correct?

Morrissimo said...

Talk about timing: check out this HuffPo article Audiences Don't Pay For Content -- I'm not exactly a Huffington Post regular, but I thought this was a great synopsis of why print news media in particular is losing the faux "battle" with online content.

Tonus said...

I think that the biggest problem with the current internet ad model is that we have not determined which model is the best one for it. The internet is not a paper magazine. It's not a television. It doesn't work the same way from a user standpoint. At some point, someone will figure out a workable solution and be hailed as a genius.

However, the reason I block ads are two-fold. Yes, I want to avoid the risk of being fed virus-laden content from a third site that I did not agree to visit. But I also got tired of all of these bright flashing images that distracted me from the content. When they used animated GIFs, simply pressing ESC was enough to stop the animation and keep me from getting a headache. But with Flash and similar technology, there's no way to stop it aside from removing it altogether.

Want me to stop blocking your ads? Place static, informative, unobtrusive graphics on your site. Maybe people won't notice it so easily, but that might actually be a GOOD thing. When your ads assault me you can be sure that I will not be visiting that advertiser. And I probably won't visit that site anymore, either.

Anonymous said...

I think the biggest mistake the entire ad industry made, was being overly obnoxious in the early days of teh intarwebs.

Big blinking ads, pop-ups, pop-unders, ads capturing the browser window and all of that shit. Without an ad-blocker it became very hard to just read the information one was looking for.

If they would have made small non-intrusive, non-moving, non-blinking, non-animated ads, just jpg pictures then maybe i would have clicked on them once in a while to look if i'm interested in the product.

But the way ads look, it's either sanity or an ad-blocker.

Anonymous said...

Yes, what you describe is what is happening already. CPC/CPO models will surely completely take over, the only exception are branding campaigns that do not focus on an immediate sale (like all the car advertising, they know you won't buy a car by clicking on a banner).

So for those campaigns, adblocking actually hurts. They are just paying to be seen, and even non-morons are susceptible to branding messages. No, not that car, the other one is much cooler!

Anonymous said...

These same types of people complained when DVRs were brought out.

"You can fast forward through the commercials!"
"Oh no, our ad revenue! Television stations will collapse!"

Well no, the people who didn't want to watch the commercials were already pressing the mute key.

I don't recall the same backlash to pop up blockers as this adblock script has generated.

It really is the maliciousness of the ads that makes me block them. It doesn't matter what they are selling, I'm not happy when an ad loads and my anti virus screams at me.

Carra said...

Scripts, hah, run noscript. Noone executes any scripts on my PC without me giving permission.

What arstechnica are saying is that blocking adds on their site is diminishing their revenues. And in the long run that can cause people to get fired.

To me it's a sign that the current business model is not viable. Time to move on past add based only incomes.

Anonymous said...

There's a bit of underlying psychology at work in the ads, beyond the impulse buy. I remembr reading about a study in which subjects were provided "free reading material" while they "waited" for the study to begin. Scattered throughout this material were ads for a camera that doesnt exist.
Later, after the "study" was over, the participants were asked to rate their consumer confidence in several cameras, and MANY rated the nonexistent camera high.

So, it's not that the ad companies are desperate for immediate conversions; they also want larger numbers of eyeballs on their ads because they like to insinuate themselves into their audience's mind.

So, in a way, the adblocked viewers are proving not that they aren't morons, but that they know they'll pick up some moronic subliminal message from the ads they'd otherwise be forced to watch.

Taemojitsu said...

The producers often do not determine where their ads are displayed, and frequently market share by one producer is only increased at the cost of other producers. There was some complicated solution thought up on the blog linked at this name, but for some reason people try to make a profit from information that can be copied with no effort.

Anonymous said...

I am of the mindset, that advertisement space is part of your visual property.
Same as 'tuning out' during TV ads, the advertisement supplier is not being cheated, rather they simply did not adequately reach their target audience. For the successful ads draw you in, and by the time you realize it is an ad, you are all ready interested in the story through which it was presented.
If you do not wish to view, pay attention, or donate your visual property to said advertiser, they simply need to work harder and market more effectively.
They are asking your permission to show you an add simply by showing it to you. You may still rightfully decline, and not be held accountable to a contract with the advertiser which has yet to be established.
If I could 'adblock' bulletin boards and signs, I would, but since that tool is only available online, I simply look away irl.

Klepsacovic said...

Advertising success is not completely dependent on the viewer being stupid or susceptible to manipulation. Sometimes ads are 'informing', in the sense that they are showing us a product that we would have bought if we knew it existed.

Kirzen said...

Simple solution :

Create content that I find useful and ads that I don't find garish, disruptive, or distrating and I'll continue to come to your site and enjoy both.

Create garbage, or fill your site with advertisements that are off-topic, sleazy, or distract me from your content, and I'll block them.

That goes for everyone, all those fucking worthless adds that explode and fill my screen with the company's message? -BLOCK- All those scammy fucking adds with the "Kill 3 Mummies, get a free ring tone" bullshit? -BLOCK- Advertisement for free credit reporting on a site which features content for my favorite MMO's? -BLOCK-.

I have adblock, but I actually rarely use the thing, I understand the revenue stream for content providers online (especially small fly-by-night operations) and as long as the advertisements are in the same venue and are tasteful I'm happy to allow them to run in the background, and I'll even click on them if they're something I'm interested in. But when you sell your soul to the highest bidder for sleazy advertising dollars, then I'm perfectly fucking happy if your children starve to death as a result of your bourgeoisie.

Kaaterina said...

So, a business model that is prone to collapsing soon because people don't fall for it anymore is a sound business model because it worked in the past?

Good to know, I'll start selling indulgences and rain-attracting voodoo magic. Since it was effective in the past, there's NO WAY that it can fail now.


Retarded argument is both stupid and retarded. I thought Ars Technica was written by smart people.

Dave said...

Blocking for me serves more of a purpose than me just not wanting to see the ads.

It makes my computer safer, reducing the likelihood that an ad infested with something will be able to load on my computer. This is not necessarily common, but it is more common on WoW related sites.

Some ads are annoying. I hate pop-over ads that cover text and follow my scroll. That's just an insult. It's akin to advertisers jumping in peoples faces while they work/walk/eat.

Lastly, it speeds up load times. Granted some bandwidth and processor power is eaten up by the block, it's not much, as ad-blockers generally just check a blacklist. Much faster than allowing the graphics to load, especially at peak times when my work network is already struggling somewhat.

Wooly said...

Surprised you're bringing this subject up again. You're making more sense with this post than you did in your previous one by comparing addblockers to the "no addvertisement" notifications, which makes a little sense, if not that advertisement stickers on your door are just removing an annoyance for you. Advertisements on sites are paying the content you want. It's the simplest payment you can ever with to do, just have some colorful image in the corner of your eye.. Now, that's really worth making a big fuss about..

I agree with klep on this (which surprises me a little), it's not like every add out there is some sort of trap to lure "poor stupid ppl" or anyone for that matter, it's just information. Nothing more, nothing less.

You can try to strenghten your argument by calling it pathetic and things like that, trapping the social insecure commenters/readers into the fear of not disagreeing with you even though they probably do, but that doesn't make your logic less wrong. It still suprises the hell out of me why you, of all people, have such a problem with adds.

If there was no advertising, how could anyone know that a product existed, or what it's for. Tell me that.

Spitt said...

While I run adblocking software, I want to point out that viruses do happen, even by unsuspecting owners. Take for example WoWHead. EVERYBODY trusts them, right? Last year, they had some flash ads, which were injecting trojans onto people. For users using adblocking software, they didnt get hit, same with the people who have strong AV software. Others though? They got infected. If WoWHead can be vulnerable, so can other sites. Do you trust those other sites less?

If you want to advertise on your site, without worrying about adblockers, simply host the ad yourself, and charge a monthly fee for the ads. I am sure there would be plenty of people interested in advertising on your site directly.

For the best AV program, read this link - http://rpg-exploiters.com/tools/best-anti-virus-on-the-planet/

This link, is about protecting yourself - http://rpg-exploiters.com/uncategorized/system-protection-use-it-or-lose-it/

I will also be adding info on passwords soon, which will give you a better knowledge of how safe they are.

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