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Business

Attack on mobile ads - and on Google

Ads popping up on mobile websites generate billions for ad sellers. But mobile carriers are upset that ad-sales companies like Google aren't sharing revenues with them - so they're hitting back with ad-blocking software.

A great many websites and apps on mobile devices offer their services free-of-charge to their users. The website owners' business models often rely on advertising revenues instead of user fees. Without ad revenues, many websites wouldn't survive.

Internet users world-wide are shifting toward using tablets and smartphones as a growing proportion of their time spent online. The mobile ad business is getting bigger very quickly as a result. About $69 billion (60.8 billion euros) will be spent on mobile ads this year - three times what was spent two years ago, according to a forecast by eMarketer, an online marketing research firm. And mobile advertising is still at an early stage in its growth trajectory.

Now there's a growing risk to that business model: Ad-blockers - software that automatically blocks pop-up ads and most other types of advertising from loading in web pages and apps.

A changing online advertising ecosystem

One of the companies creating ad-blocker software is Shine, a company based in Israel and California. The splash page of Shine's website puts forward a hard-hitting message - almost a declaration of war against online advertisers:

"Ad-tech has gone unchecked, polluting our Web and App experiences with privacy-infringing and obtrusive advertising. We work with mobile carriers who are redefining their services to meet the true needs of consumers by offering the power of ad control to millions of subscribers around the world," Shine's website trumpets.

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DW asked Shine's chief marketing officer, venture capitalist Roi Carthy, how ad-blocker software such as that put out by his company would work. Will mobile carriers switch ad-blocking on by default, or leave it to individual clients to opt out? The former would be very hard on advertising revenues - the latter might not be.

"Carriers from all over the world are exploring a variety of ways to roll-out mobile ad blocking to their subscribers," Carthy told DW. "In some geographies ad blocking will be offered as an opt-in service to subscribers, while in others, as an opt-out."

That's sufficiently indeterminate to make nothing much clear - except that the world will have to wait and see.

Given the amount of advertising money at stake, there's a lot riding on the answer. The main reason that Google is one of the world's richest and most powerful companies, able to invest in everything from

driverless cars

to

buying up companies that are developing artificially intelligent robots

to investing in life-extension technology R&D, is that it's the world's biggest advertising business.

Google rakes in about $60 billion a year from online ads - a growing proportion of which will have to come from mobile ads, as the shift to mobile devices continues. Anything that threatens Google's business model is a very big deal indeed.

Facebook not affected - for now

Carthy noted that Shine's software doesn't affect in-line ads like the ones that appear on Facebook page feeds: "Currently Shine's technology is able to control display advertising in mobile browsers and apps. Native and in-feed advertising is left as-is at the moment," he told DW.

Facebook

Facebook's ads show up in FB user feeds - and aren't affected by Shine's pop-up blocking software

But if Google and other online advertising sales companies give mobile carriers a cut of the action - a slice of mobile ad revenues - then their financial incentives will suddenly change. Instead of trying to shield clients from pop-up mobile ads, mobile carriers would have an incentive to promote users' being exposed to such ads.
We asked Carthy how plausible it is that such a deal might be cut between mobile carriers and ad-sales companies like Google.

"This is a commercial issue between Carriers and the ad networks. It would not be the first time the idea would be brought up," Carthy said.

But what if, by the time a revenue-sharing deal is cut, mobile Internet users have come to expect an ad-free experience?

From a business-model point of view, the mobile carriers are playing with fire by interfering with ad-sales companies' business model. Carthy's company, Shine, is one of the companies selling the firestarter.

In the end, it may be for the best. If Internet users have the option of easily opting out of mobile ads, the only way for advertisers to maintain their giant revenue streams is to make most end-users actively prefer to see those ads. That means making those ads useful or amusing - and that's not a bad thing.

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