How Ad-Blocking Software May Affect Google

The face of digital advertising has changed rapidly over the last few years, but now the market may have found a formidable enemy: ad-blocking software. It has become much more prevalent and more easily accessible, and it’s sure to have sweeping impacts, not just on publishers but also digital ad giants Google and other players.

iOS 9 Ad-Blocking Apple

Apple users go crazy for ad-blocking software

Perhaps the biggest sign that the average internet user is starting to adopt ad-blocking software is that this week, something rather surprising happened. Ad-blocking software was the top most-downloaded app this week in Apple’s App Store.

The company pushed out the full public version of iOS 9 this week, and one of the highlights is that it enables users to block ads. The chart for the top paid apps in Apple’s App Store demonstrates that users are willing to pay for ad-blocking apps as well. At the moment of this writing, ad-blocking apps take up the top two positions in paid apps, plus fifth place an 15th place. Quartz noted that on Wednesday, the day Apple released iOS 9, the top ad-blocking app was downloaded 12,000 times, earning the developer $2.99 per download.

How far-reaching is ad-blocking right now?

Although ad-blocking has been possible for quite some time, the iOS 9 release is calling more attention to it and making it easier for iOS users to block ads. This is especially important to advertisers because historically, surveys have indicated that Apple users spend more money on their devices than Android users do.

It seems Google has the highest exposure to ad-blocking, but just how serious of a threat is it? At this point, Barclays analyst Paul Vogel thinks the impact has been limited. However, he believes that could change because of how much easier it is getting for internet users to block ads. Also he thinks more people are aware of the capability now even though it has been possible for the last decade or so.

He states that right now, most ad-blocking occurs on desktop web browsers and isn’t impacting mobile browsing much.  And since mobile internet usage is stealing from desktop internet usage, the impact is further minimized.


Speaking to the release of iOS 9, he said it seems like ad-blocking is only impacting browsers on Apple devices running on the current version of the operating system. He thinks apps are not being affected by it yet.

Ad-blocker users growing

Right now Vogel isn’t worried about the impact of ad-blocking software on Google even though he thinks the search giant still has the greatest percentage of mobile web traffic that can be monetized. The company has recognized the threat from ad-blocking as far back as 2005 when it listed ad-blocking technologies as a top risk for its business.

A study conducted by PageFair and Adobe earlier this year found that as of June, about 198 million internet users were using ad-blocking software. That represented a 41% year over year growth rate, although by the end of this year, Vogel thinks only about 9% of desktop and laptop users will be using it.

The analyst noted that ad-blocking apps have been limited on mobile devices until now. In fact, stock devices didn’t even allow them until recently, so users had to jailbreak them and use unapproved software to block ads. This is changing quickly, however, as Adblock Pro now has its own browser for iOS and Android devices that works the same way its desktop ad-blocker works. Ad-Blocker and Weblock also offer something similar.

But these approaches to blocking ads are focused on browsers, and according to Vogel, only about 10% of a user’s mobile device time is spent on a browser, meaning the main sources of ads on mobile devices—apps—can still show users ads.


What does this mean for Google?

So if Google is the most-exposed to ad-blocking tech, then just how much sales might it lose? Vogel suggests Google, Yahoo and Bing combined might only lose search ad revenue of about $2.5 billion. Assuming ad-blocker penetration surpasses 25% of mobile users and cost per click triples to $1.50 per click, he sees only an impact of a little over $10 billion combined


Looking at the impact of iOS 9’s ad-blocking capabilities, the Barclays analyst suggests that there may only be a 1% to 1.5% headwind on mobile ad revenue over the next couple of years. Of course this depends on how many Apple users upgrade to iOS 9 and also enable the ad-blocking capabilities.


Charts/ graphs in this article are courtesy Barclays.