what is the cost of ad blocking? - digiday wtf ad blocking nyc, 1/14/16
TRANSCRIPT
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MONEY QUESTION:WHAT VALUE WOULD THE
LOST IMPRESSIONS HAVE HAD?
REVENUE = IMPRESSIONS X CPM(?)
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THE AVERAGE CPM???
So, 16% US ad blocking rate = 16% fewer impressions = 16% less revenue?
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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.
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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
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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
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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.
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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???
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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.
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A BALLPARK FORMULA
Average of direct and programmatic
CPMsImpressions
blocked 50%X X
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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.
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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.