what is the cost of ad blocking? - digiday wtf ad blocking nyc, 1/14/16
TRANSCRIPT
MONEY QUESTION:WHAT VALUE WOULD THE
LOST IMPRESSIONS HAVE HAD?
REVENUE = IMPRESSIONS X CPM(?)
THE AVERAGE CPM???
So, 16% US ad blocking rate = 16% fewer impressions = 16% less revenue?
PROBLEM #1:PROGRAMMATIC VS. DIRECT
• Programmatic inventory monetizes at much lower rates than direct-sold inventory.
• Publishers usually aren’t sold out, so most of the ad impressions lost to ad blocking should be valued at programmatic CPMs rather than the average CPM of all impressions.
SAMPLE PUBLISHER
0%
25%
50%
75%
100%
Q1 Q2 Q3 Q4
Direct (CPM = $10)Programmatic (CPM = $2)
= $7
Average CPM of impressions lost to
ad blockers
= $4
ad blocked impressions
Shar
e of
Impr
essio
ns Average CPM
PROBLEM #2: SUPPLY & DEMAND
Ad supp
ly with
ad blo
cking
Demand for AdvertisingAs the supply of ad inventory increases, the equilibrium price (CPM) will decrease.
P1
Q1
PRIC
EQUANTITY
PROBLEM #2: SUPPLY & DEMAND
Ad supp
ly with
ad blo
cking
Ad supp
ly witho
ut ad
blockin
g
Demand for AdvertisingP1
P2
Q1 Q2
PRIC
EQUANTITY
As the supply of ad inventory increases, the equilibrium price (CPM) will decrease.
SO…WHAT ARE THE LOST IMPRESSIONS WORTH?
Fraction of the year sold out X Direct CPM X
Fraction of the year NOT sold out
X XProgrammatic CPM
Ad Block Rate
Ad Block Rate
=
=
?
+
?____________
???
X
= ???????
lost impressions ) ( elasticity of demandX???
To determine:
• How big of a threat ad blocking is
• How to treat ad block users
• How much time to devote to the problem
• How much money to spend on an ad blocking solution
WHY ARE WE ASKING THE QUESTION?
A ballpark figure is
sufficient to address these.
A BALLPARK FORMULA
Average of direct and programmatic
CPMsImpressions
blocked 50%X X
SLATE’S APPROACH: LOOK FORWARD• Lost impressions amount to roughly 8% of total revenue.
• We might be able to recover half of that with an aggressive Conde-style wall.
• We would irritate and lose tech savvy readers who may be monetizable elsewhere in the future.
• We would irritate and lose tech savvy readers who won’t share our content.
SLATE’S APPROACH: LOOK FORWARD
• We’re asking ad block users to voluntarily become paid members.
• We’re eliminating intrusive advertising on desktop and improving page speed, then we’ll ask users to disable their ad blockers.
• We’re investing in rapidly growing platforms where ad blocking isn't possible: Native apps. Podcasting. Facebook Instant Articles. Apple News.
