I wouldn't be wrong if I say that most of websites derive their income through ads. It has become the go to method of monetization for most websites on the internet. Its also by far the biggest source of income for a variety of internet companies such as Google and Facebook.
Lately there has been a lot of discussion regarding the feasibility of ads as a source of income. This has more so been the case with the rapid shift of browsing to mobile devices. The value of an ad on a desktop is far lower than that on a newspaper/magazine. Similarly the value of an ad on a mobile device is again far lower than that on a desktop.
Value of ads :-
Newspaper/Magazine>Desktop>Mobile
Apart from the lower value of ads on mobile devices, the screen space on a mobile device is far lower than that of a desktop or a newspaper. This has led to instances where ads are often inserted in ways that degrade the entire user experience. Ads placed in between the content, auto play videos, pop up ads and flash ads are some examples of bad ads to name a few. These form of ads have made the use of ad blockers even more popular among people. From being something that was used by tech savvy people, ad-blockers are now being installed by the mainstream public.
Some facts about Ad-Blocking -
1. Adblock usage grew by nearly 70%between June 2013 – June 2014.
2. There are about 144 million active Adblock users around the world.
3. The most popular custom extension on Desktop Safari is AdBlock.
All this has led to some interesting developments in the tech blogging industry. It has led to the acquisition of Anand Tech by Purch and Re/Code by Vox. Although Anand Tech hasn't given out any solid financial reason for its sell out to the Purch, the Re/Code's Kara Swisher told The New York Times "" being a small publication - even one that's influential - is tough"". ""Everybody is bigger than us,"" Swisher told NYT's Sydney Ember. ""It's not a secret that being a smaller fish is really hard."" Also lets not forget the shut down of GigaOM
To be frank Re/Code wasn't all that small, it had a solid 1.5 million unique page views every month. .
This had all happened before one event. This one event I believe will make monetization via advertising even harder.
As I said a lot of news consmption now happens via mobile devices. When it comes to mobile devices Android and iOS are the leaders, no doubt in that.
Android for its part has removed Ad Blockers from Play Store. I feel this has been done since Google's own business model heavily relies on displaying ads. Even when someone downloads an Ad Blocker from a third party source on Android, the Ad Blocker would not work unless and until the smartphone's rooted. Thankfully the number of rooted Android smartphones are still pretty low since a lot of Tier 1 manufacturers deny warranty for rooted Android smartphones. Apart from that rooting is still a fairly complex task becoming even more complicated as time passes by. There was once a time during the Froyo era when just installing an app like Framaroot would root your device. These days rooting does not happens without the computer and there are now two steps to rooting. One is to unlock the bootloader and then two is to root the device.
iOS given its closed nature doesn't allow installation of third party apps and doesn't have any provisions for blocking ads unless and until someone decides to jailbreak their iPhone. But starting with iOS 9 Apple's bringing content blocking extension to iOS 9.
One of the most popular use cases of this content blocking extension will be that its going to be used to make Ad Blockers.
Think about it practically, what will one lose if s/he installs an Ad Blocker that's available for free. This Ad Blocker inevitably will end up being at the top of free apps if the current position of AdBlock on desktop Safari is any indication. Also this Ad Blocker will help people save a lot of data and processing power leading to improved load times and lesser battery drain. Not to forget the benefit of privacy the Ad Blocker would end up delivering. Also starting with iOS 9 the in app browser will be powered by the same Nitro engine that powers Safari so an Ad Blocking extension will apply universally to all possible forms of opening web pages.
This will have a far greater impact on publishers in my opinion. I agree iPhones represent a minority of the total smartphone base when compared to what Android commands. But the base which Apple represents is also the most valuable base. Even though iPhone lacks significantly in developing nations in terms of market share except for China recently, it has a very big market share in a lot of developed countries such as America, Japan, UK etc.
People of countries such as America, Japan and UK have some of the highest spending capacity and are the most attractive demographic for advertisers and publishers alike. If these people get the power to block ads on their iPhone with the download of a simple app, it would make a huge hole in the pockets of publishers since the price paid for every ad impression/CPM varies from country to country and an ad impression to someone in America is far more profitable than to someone in Somalia. Also approximately one out of every two people in America use an iPhone.
The reduced value of ads on mobile, increased usage of Ad Blockers and content blocking extension on iOS 9, will make it difficult for effective monetization of blogs via advertisements.
I agree there are other forms of marketing such as affiliate marketing and referral links. But even in case of referral links, they are linked to bigger websites that also monetize via the same method of ads. Also ads are still the most common method of monetization that contribute the vast majority of the pie.
Paywall would end up being harmful -
So since monetization via traditional ads are under danger many people feel that Paywalls would be the best way out.
Even though ads degrade the reading experience, cause longer load times and compromise privacy, they have done two things in a great manner and that's subsidizing the content and bolstering competition/coverage.
Subsidizing content -
As I said earlier the CPM keeps varying from country to country. So for most publishers a vast majority of their revenue would come from viewers of developed nations. These viewers of developed nations are what would matter the most in terms of revenue generation. The views and subsequent revenue generation from viewers of emerging nations would often be considered as a bonus of sorts. This effectively made the viewers of developed nations subsidize the cost of access for viewers of developing nations. This made sure that the content was free for all to access irrespective of where the viewer originated from. This has helped spread the access to knowledge significantly especially for people like me living in emerging countries.
If we consider a situation where Paywalls are set up for the majority of the websites, access to these websites and their respective content would become hugely prohibitive for people of emerging countries. The pricing of these Paywalls would obviously be in $/€/£ and these prices when converted to local currency of emerging countries would be very high and prohibitive.
Cost of data for users of emerging countries is itself a very big barrier to internet access. Although people pay the data costs, I doubt people would be willing to pay the costs required for accessing tech websites.
I would also like to mention that the real reason I have been so interested in tech blogging is because of the zero costs required apart from data access fee to access various tech websites. If tech websites had a Paywall ever since the very beginning, I wouldn't even be writing this article right now since everything written in this article has been possible because of knowledge derived from free to use tech websites.
Limited choice/coverage -
Although the ad regime has lead to click bait strategies at various websites, it has improved competition/coverage a lot as well as choice.
I visit around 26 websites once every month. If a Paywall regime is to come into effect, I highly doubt I would be able to pay for articles of all 26 websites. Certain websites like Android Police or say 9to5 Mac would not be paid for by me. I am not saying these are bad websites, in fact I am a personal fan of Mark Gurman but given that these websites cover niche topics I wonder if I would be able to pay them rather than paying for a website like The Verge/New York Times that would cover all stuffs about tech in general.
But even though websites like 9to5 Mac and Android Police cover niche topics they are often the first to break out leaks and offer certain nitty-gritty details that other mainstream websites such as The Verge/New York Times often miss out.
Geographical distinction wouldn't work -
Some people might say that differential pricing of Paywalls can be set up depending on the GDP per capita of the country.
This does make sense in theory but if China is anything to go by then Geographical level distinction will not be an easy task. The Chinese government because of censorship and other issues have blocked access to certain American websites but people in China still use these websites with the help of a VPN.
There's nothing stopping other people from doing the same. I mean if I were to imagine that geographical level distinction for Paywalls did come up, how difficult would it be for someone to fake their location through the use of a VPN or some other software and pay lower subscription rates.
If the vast majority viewers started faking their location with the help of a VPN to lower the rates of their subscription, like the current scenario of Ad Blocking, publishers would be forced to increase the lower rates. This increase would once again make the websites prohibitively expensive for users of developing countries making us come back to ground zero.
The solution is somewhere in the middle -
I believe the solution to all this would be a combination of Facebook Instant articles and subscriptions. Facebook Instant articles in my opinion would help solve three problems.
There are currently four issues with display ads -
1. They look bad and often spoil the entire reading experience
2. They consume a lot of data and processing power. Often times an article whose actual content weighs just 700-800 kilobytes of text ends up consuming around 7-8 MB of data because of ads.
3. They can easily be blocked with the help of an Ad Blocker and this blocking happens because of points 1 and 2.
4. Ads are a compromise on privacy.
Facebook Instant articles can help solve points 1,2 and 3.
1. Facebook Instant articles would be monetized via native ads displayed in feed. These native ads look a lot better than conventional display ads and are a lot more effective as well because of Facebook's plethora of data on users. This is of course assuming the publisher allows Facebook to display the ads for it. If the publisher wants to display the ad themselves then I doubt if Facebook's data will be of any use.
2. Facebook has promised that articles will load up to 10 times faster than a conventional browser. Although load time depends on a lot of factors, size is definitely the biggest factor and if Facebook is promising a 10 times increase in load time them the size of article has definitely been reduced.
3. Given that the ads will be native and viewed with Facebook's app's news feed, ad blockers would be useless against it. This would give publishers a huge sigh of relief.
There is however one point Facebook's Instant articles won't be able to solve and one thing it would be lacking. These are.
1. Privacy
2. The open Web
Privacy -
Privacy would be something that would be exploited even more in case of Facebook Instant articles. Facebook's plethora of data on every users signed into its network and the complex algorithms deliver some of the most highly targeted ads. I feel most media companies using Facebook's Instant articles would tie up with Facebook to display native ads. Just like how cookies were used during the browser era to make a profile on us, this time it would be Facebook's data.
On a more personal note I would say the issue of privacy is a little bit inflated. Most of the ads we see are based upon our data but its not that this data is being reviewed by a real life person. When Facebook serves me an ad its not like my data is passed on to a human who goes through it and then selects what kind of ad is best suited for me, rather all this data is passed through complex algorithms that select ads from the ad inventory and displays the ad. Second a lot of my data would probably be stored under a code number such as AB0973CF or something like that. So even the algorithm wouldn't know which data belongs to whom in real life. Apart from this Edward Snowden has very well documented NSA's data collection activities, even the UK has PRISM if I am not wrong. So we are already under surveillance.
Open Web -
Secondly as Nilay Patel pointed out in his article "Why the Mobile Web sucks" things like Facebook's Instant articles and Apple's News app would make it difficult for the production of articles such as Bloomberg's What is Code or The Verge's piece on Fanboys that make use of interactive animations. The implementation of these animations will vary from platform to platform with one method to be followed by Apple News and another by Instant Articles.
To be frank Instant articles would be of great help to people like me from emerging nations. I really don't care much about my data being taken away by some company as long as long I get valuable content/service in return and similarly I am not much of a fan of these animations. For me plain text written properly with few pictures is more than enough and I am sure this is the case with a lot of other people as well. For people like me Facebook Instant articles would be the best thing ever.
For people who are really concerned about their privacy and want unique articles, the publication can set up a subscription method whereby paying a fixed fee the user would be able to get great content consisting of all those animations without any form of tracking. These users would be the one that would still open a web browser to access the articles.
Conclusion -
Display ads aren't going to pay the bills in the near future. A combination of stuffs like Instant articles and subscription would keep publications alive where a majority of revenue would come from Instant articles and subscription might act as bonuses.
Lately there has been a lot of discussion regarding the feasibility of ads as a source of income. This has more so been the case with the rapid shift of browsing to mobile devices. The value of an ad on a desktop is far lower than that on a newspaper/magazine. Similarly the value of an ad on a mobile device is again far lower than that on a desktop.
Value of ads :-
Newspaper/Magazine>Desktop>Mobile
Apart from the lower value of ads on mobile devices, the screen space on a mobile device is far lower than that of a desktop or a newspaper. This has led to instances where ads are often inserted in ways that degrade the entire user experience. Ads placed in between the content, auto play videos, pop up ads and flash ads are some examples of bad ads to name a few. These form of ads have made the use of ad blockers even more popular among people. From being something that was used by tech savvy people, ad-blockers are now being installed by the mainstream public.
Some facts about Ad-Blocking -
1. Adblock usage grew by nearly 70%between June 2013 – June 2014.
2. There are about 144 million active Adblock users around the world.
3. The most popular custom extension on Desktop Safari is AdBlock.
All this has led to some interesting developments in the tech blogging industry. It has led to the acquisition of Anand Tech by Purch and Re/Code by Vox. Although Anand Tech hasn't given out any solid financial reason for its sell out to the Purch, the Re/Code's Kara Swisher told The New York Times "" being a small publication - even one that's influential - is tough"". ""Everybody is bigger than us,"" Swisher told NYT's Sydney Ember. ""It's not a secret that being a smaller fish is really hard."" Also lets not forget the shut down of GigaOM
To be frank Re/Code wasn't all that small, it had a solid 1.5 million unique page views every month. .
This had all happened before one event. This one event I believe will make monetization via advertising even harder.
As I said a lot of news consmption now happens via mobile devices. When it comes to mobile devices Android and iOS are the leaders, no doubt in that.
Android for its part has removed Ad Blockers from Play Store. I feel this has been done since Google's own business model heavily relies on displaying ads. Even when someone downloads an Ad Blocker from a third party source on Android, the Ad Blocker would not work unless and until the smartphone's rooted. Thankfully the number of rooted Android smartphones are still pretty low since a lot of Tier 1 manufacturers deny warranty for rooted Android smartphones. Apart from that rooting is still a fairly complex task becoming even more complicated as time passes by. There was once a time during the Froyo era when just installing an app like Framaroot would root your device. These days rooting does not happens without the computer and there are now two steps to rooting. One is to unlock the bootloader and then two is to root the device.
iOS given its closed nature doesn't allow installation of third party apps and doesn't have any provisions for blocking ads unless and until someone decides to jailbreak their iPhone. But starting with iOS 9 Apple's bringing content blocking extension to iOS 9.
One of the most popular use cases of this content blocking extension will be that its going to be used to make Ad Blockers.
Think about it practically, what will one lose if s/he installs an Ad Blocker that's available for free. This Ad Blocker inevitably will end up being at the top of free apps if the current position of AdBlock on desktop Safari is any indication. Also this Ad Blocker will help people save a lot of data and processing power leading to improved load times and lesser battery drain. Not to forget the benefit of privacy the Ad Blocker would end up delivering. Also starting with iOS 9 the in app browser will be powered by the same Nitro engine that powers Safari so an Ad Blocking extension will apply universally to all possible forms of opening web pages.
This will have a far greater impact on publishers in my opinion. I agree iPhones represent a minority of the total smartphone base when compared to what Android commands. But the base which Apple represents is also the most valuable base. Even though iPhone lacks significantly in developing nations in terms of market share except for China recently, it has a very big market share in a lot of developed countries such as America, Japan, UK etc.
People of countries such as America, Japan and UK have some of the highest spending capacity and are the most attractive demographic for advertisers and publishers alike. If these people get the power to block ads on their iPhone with the download of a simple app, it would make a huge hole in the pockets of publishers since the price paid for every ad impression/CPM varies from country to country and an ad impression to someone in America is far more profitable than to someone in Somalia. Also approximately one out of every two people in America use an iPhone.
The reduced value of ads on mobile, increased usage of Ad Blockers and content blocking extension on iOS 9, will make it difficult for effective monetization of blogs via advertisements.
I agree there are other forms of marketing such as affiliate marketing and referral links. But even in case of referral links, they are linked to bigger websites that also monetize via the same method of ads. Also ads are still the most common method of monetization that contribute the vast majority of the pie.
Paywall would end up being harmful -
So since monetization via traditional ads are under danger many people feel that Paywalls would be the best way out.
Even though ads degrade the reading experience, cause longer load times and compromise privacy, they have done two things in a great manner and that's subsidizing the content and bolstering competition/coverage.
Subsidizing content -
As I said earlier the CPM keeps varying from country to country. So for most publishers a vast majority of their revenue would come from viewers of developed nations. These viewers of developed nations are what would matter the most in terms of revenue generation. The views and subsequent revenue generation from viewers of emerging nations would often be considered as a bonus of sorts. This effectively made the viewers of developed nations subsidize the cost of access for viewers of developing nations. This made sure that the content was free for all to access irrespective of where the viewer originated from. This has helped spread the access to knowledge significantly especially for people like me living in emerging countries.
If we consider a situation where Paywalls are set up for the majority of the websites, access to these websites and their respective content would become hugely prohibitive for people of emerging countries. The pricing of these Paywalls would obviously be in $/€/£ and these prices when converted to local currency of emerging countries would be very high and prohibitive.
Cost of data for users of emerging countries is itself a very big barrier to internet access. Although people pay the data costs, I doubt people would be willing to pay the costs required for accessing tech websites.
I would also like to mention that the real reason I have been so interested in tech blogging is because of the zero costs required apart from data access fee to access various tech websites. If tech websites had a Paywall ever since the very beginning, I wouldn't even be writing this article right now since everything written in this article has been possible because of knowledge derived from free to use tech websites.
Limited choice/coverage -
Although the ad regime has lead to click bait strategies at various websites, it has improved competition/coverage a lot as well as choice.
I visit around 26 websites once every month. If a Paywall regime is to come into effect, I highly doubt I would be able to pay for articles of all 26 websites. Certain websites like Android Police or say 9to5 Mac would not be paid for by me. I am not saying these are bad websites, in fact I am a personal fan of Mark Gurman but given that these websites cover niche topics I wonder if I would be able to pay them rather than paying for a website like The Verge/New York Times that would cover all stuffs about tech in general.
But even though websites like 9to5 Mac and Android Police cover niche topics they are often the first to break out leaks and offer certain nitty-gritty details that other mainstream websites such as The Verge/New York Times often miss out.
Geographical distinction wouldn't work -
Some people might say that differential pricing of Paywalls can be set up depending on the GDP per capita of the country.
This does make sense in theory but if China is anything to go by then Geographical level distinction will not be an easy task. The Chinese government because of censorship and other issues have blocked access to certain American websites but people in China still use these websites with the help of a VPN.
There's nothing stopping other people from doing the same. I mean if I were to imagine that geographical level distinction for Paywalls did come up, how difficult would it be for someone to fake their location through the use of a VPN or some other software and pay lower subscription rates.
If the vast majority viewers started faking their location with the help of a VPN to lower the rates of their subscription, like the current scenario of Ad Blocking, publishers would be forced to increase the lower rates. This increase would once again make the websites prohibitively expensive for users of developing countries making us come back to ground zero.
The solution is somewhere in the middle -
I believe the solution to all this would be a combination of Facebook Instant articles and subscriptions. Facebook Instant articles in my opinion would help solve three problems.
There are currently four issues with display ads -
1. They look bad and often spoil the entire reading experience
2. They consume a lot of data and processing power. Often times an article whose actual content weighs just 700-800 kilobytes of text ends up consuming around 7-8 MB of data because of ads.
3. They can easily be blocked with the help of an Ad Blocker and this blocking happens because of points 1 and 2.
4. Ads are a compromise on privacy.
Facebook Instant articles can help solve points 1,2 and 3.
1. Facebook Instant articles would be monetized via native ads displayed in feed. These native ads look a lot better than conventional display ads and are a lot more effective as well because of Facebook's plethora of data on users. This is of course assuming the publisher allows Facebook to display the ads for it. If the publisher wants to display the ad themselves then I doubt if Facebook's data will be of any use.
2. Facebook has promised that articles will load up to 10 times faster than a conventional browser. Although load time depends on a lot of factors, size is definitely the biggest factor and if Facebook is promising a 10 times increase in load time them the size of article has definitely been reduced.
3. Given that the ads will be native and viewed with Facebook's app's news feed, ad blockers would be useless against it. This would give publishers a huge sigh of relief.
There is however one point Facebook's Instant articles won't be able to solve and one thing it would be lacking. These are.
1. Privacy
2. The open Web
Privacy -
Privacy would be something that would be exploited even more in case of Facebook Instant articles. Facebook's plethora of data on every users signed into its network and the complex algorithms deliver some of the most highly targeted ads. I feel most media companies using Facebook's Instant articles would tie up with Facebook to display native ads. Just like how cookies were used during the browser era to make a profile on us, this time it would be Facebook's data.
On a more personal note I would say the issue of privacy is a little bit inflated. Most of the ads we see are based upon our data but its not that this data is being reviewed by a real life person. When Facebook serves me an ad its not like my data is passed on to a human who goes through it and then selects what kind of ad is best suited for me, rather all this data is passed through complex algorithms that select ads from the ad inventory and displays the ad. Second a lot of my data would probably be stored under a code number such as AB0973CF or something like that. So even the algorithm wouldn't know which data belongs to whom in real life. Apart from this Edward Snowden has very well documented NSA's data collection activities, even the UK has PRISM if I am not wrong. So we are already under surveillance.
Open Web -
Secondly as Nilay Patel pointed out in his article "Why the Mobile Web sucks" things like Facebook's Instant articles and Apple's News app would make it difficult for the production of articles such as Bloomberg's What is Code or The Verge's piece on Fanboys that make use of interactive animations. The implementation of these animations will vary from platform to platform with one method to be followed by Apple News and another by Instant Articles.
To be frank Instant articles would be of great help to people like me from emerging nations. I really don't care much about my data being taken away by some company as long as long I get valuable content/service in return and similarly I am not much of a fan of these animations. For me plain text written properly with few pictures is more than enough and I am sure this is the case with a lot of other people as well. For people like me Facebook Instant articles would be the best thing ever.
For people who are really concerned about their privacy and want unique articles, the publication can set up a subscription method whereby paying a fixed fee the user would be able to get great content consisting of all those animations without any form of tracking. These users would be the one that would still open a web browser to access the articles.
Conclusion -
Display ads aren't going to pay the bills in the near future. A combination of stuffs like Instant articles and subscription would keep publications alive where a majority of revenue would come from Instant articles and subscription might act as bonuses.
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