For the Future of Mobile Advertising, Look to the Music Industry

TechCrunch's Jon Evans offers a useful survey of the reactions elicited by Apple's decision to support content-blocking browser extensions in iOS 9. Notwithstanding the breast-beating of Marco Arment (who removed his hit ad blocker from the App Store after two days because it "just didn't feel good"), I agree wholeheartedly with Jon's conclusion:

But you know what? If the ads publishers served weren’t awful, intrusive, deceptive if not fraudulent toxic waste, the overwhelming majority of people would be completely happy to surf without ad blockers, accepting the occasional ad as a reasonable compromise. If Ceglowski is right, if we are in an advertising bubble that will take down swathes of publishers and ad networks when it bursts — and that seems at least plausible — then they will have no one to blame for their collective demise but their own shortsightedness and greed.

I would go further than this though, and in fact I did so in a three-year-old blog post:

If we succumb willingly to disfigured television shows, psychological manipulation and higher prices on SUVs and shampoo so that we can avoid paying a few dollars for entertainment and internet services, we have no one to blame but ourselves. When the most frightening hoax imaginable is that Facebook will start charging users, we can hardly blame them for slathering more and more lucrative ads onto their website. It would be fantastic if creative types were to look for less intrusive ways of financing their work. But that is unlikely to happen until consumers start to realize that free is sometimes the most expensive price of all.

The trench warfare between content producers and consumers will come to an end only if users are willing to pay for the content directly. In assessing how and when this might come to pass, it is instructive to consider the example of the recording industry.

Music was undergoing a similarly tumultuous transition 15 years ago, spurred by the advent of peer-to-peer networks like Napster that let users share tracks anonymously with other users. While the labels managed to shut down Napster, it was already too late: the P2P genie was out of the bottle. Many despaired that no one would be willing to pay for music anymore. And if musicians could no longer make money, then surely no one would make music anymore.

What actually happened was the iTunes Store, which opened in 2003. For the first time, it was possible to pay for music online in a way that wasn't a complete pain in ass. Last year, Apple earned $18 billion selling tracks online.

Around the same time, Rhapsody and others launched subscription services that offered all-you-can-eat music for a fixed monthly fee. These services have gained significant traction in the past few years, led by Spotify and Pandora, which let listeners choose between hearing ads or paying to get rid of them. A couple of months ago, Apple entered the fray with Apple Music. In a world of increasingly ubiquitous bandwidth, it seems likely that the music space will eventually consolidate around a number of competing online streaming services.

What does this imply for web content? Although advertising earns money for publishers, it also shields users from the reality that quality content isn't and shouldn't be free. An increasing number of publications are having a go at charging for content, but who wants to subscribe separately to every magazine and newpapers? A model where readers pay a buck or two for specific premium content would be a logical next step, echoing the successful iTunes Store model.

In the longer term, subscriptions that aggregate broad swathes of paid content will begin to gain hold, similar to music streaming services. This is taking a lot longer than for music, probably since there is no equivalent to the five big music labels for web content, which is thus far more fragmented. This doesn't mean that advertising is going away; as with music, users will have the choice of whether to view ads or pay to have them disappear.

If publishers turn to ever more obnoxious ads to fund their wares, it's natural that users will try to block them. The addition of aggregated paid subscriptions to the mix will create new revenue streams and allow them to fall back on ads that are "acceptable" and therefore less likely to be blocked.

It's been a bumpy ride, but the doom-and-gloom of the post-Napster era has proven exaggerated. Both the niche indie bands and the Taylor Swifts of the world still make enough money to continue producing gobs of new music. The same is likely to happen with web content.

Matt

Matt