February 24th, 2016
Battle Heats Up Over Mobile Ad Blocking
A new front is opening in the battle between technology companies and telecom operators: wireless ad blocking.
After two European carriers decided to begin blocking mobile ads, the debate spilled into public view at the wireless industry’s main conference here. While restricting ads isn’t a new phenomenon, blocking all advertising on a wireless network threatens to put a wedge between advertising companies, brands, publishers and consumers.
“What is the level of intrusion that the consumer should endure to consume content,” Roi Carthy, chief marketing officer at ad blocker Shine Technologies, said Tuesday on a panel at the Mobile World Congress. “We provide the choice to turn it off.”
Mr. Carthy, who claims his Israeli company is fighting a “holy war” with Silicon Valley, argues that advertisers use military-grade tools for tracking and gathering customer data and unilaterally boost wireless bills when advertisements are pushed to phones.
“I’m very uncomfortable that an operator can decide,” Google executive Benjamin Faes said at the panel. He clashed with Mr. Carthy, who he alleged is trying to be provocative by using a blocking method that goes too far.
“More and more publishers can’t just afford to give away their content for free,” said Mr. Faes, who is Google’s managing director of media and platform in Europe. Some websites already won’t deliver content, or ask for payment, when an ad blocker is installed.
Last week, European carriers Three UK and Three Italia said they would adopt network-level ad blocking using technology from Shine. Three UK and Three Italia are owned by CK Hutchison Holdings Ltd. , which is controlled by Asian billionaire Li Ka-shing, whose funds back Shine.
At Mobile World Congress, several major carriers wouldn’t rule out a similar move, though they said it was aggressive.
“We wouldn’t do anything like that without thinking it through,” said Ralph de la Vega, chief executive of AT&T Inc. ’s business solutions and international divisions. He described such blocking as a “radical move.”
Sprint Corp. CEO Marcelo Claure said it was too early in the development of such technologies to express an opinion, but noted that he planned to meet with Shine in Barcelona.
The chief executive of O2, a U.K. wireless carrier owned by Telefonica SA, said his company is experimenting with ad blocking but hasn’t decided whether to move ahead with it. Ronan Dunne said the technology “is a call to the ad industry to raise the bar in terms of the quality of the advertising that it delivers” and to focus on making ads relevant and less intrusive.
The situation may get worse before it gets better and an arms race could be on the horizon. Online video company Anvato Inc. delivers live streams that stitch ads directly into the content so they don’t appear to be any different from the rest of the feed. Founder Alper Turgut claims the platform, used by video providers including NBC and Univision, can’t be blocked by Shine’s platform. Shine declined to comment.
“There will be a war,” said Mr. Turgut, contending that people will always choose against ads if given the option, which will lead to content companies refusing to deliver the content without being paid.
“People aren’t ready to truly pay for the full cost of the content,” he said, predicting an eventual truce of sorts. “I don’t think [ad blocking] is sustainable.”
Dipanshu Sharma, CEO of mobile advertising firm xAd Inc., contends that a newspaper would cost $100 without advertisement, instead of $2 with ads. His company places ads based on user location, letting advertisers purchase locations in the same manner as Alphabet Inc. ’s Google sells keywords.
He concedes that consumers are frustrated with ads, but believes that ad blockers will be unnecessary if consumers are getting relevant ads that aren’t intrusive.
James Hilton, chief executive of advertising firm M&C Saatchi Mobile, said advertisers should be careful to not annoy consumers with advertising. But one of the reasons carriers are interested in ad blockers is because “they are struggling to provide bandwidth” as mobile data use climbs.
The use of wireless ad blockers has risen dramatically in the U.K. over the past 12 months, Mr. Hilton said, but it is still only a small number of device owners in total.
One of the first carriers to begin blocking ads across its network was Jamaica-based Digicel Group. “We were on the hunt for a long time to find a way to stop ads,” Digicel Chairman Denis O’Brien said in a recent interview. He believes Internet companies are unfairly profiting off the investments his company has made to build out its network.
Since the technology began rolling out last fall to more than 10 million customers across Latin America and the Caribbean, only a small number of subscribers have opted out to view ads again—just single digits in some markets, the company says.