Ad Blocking: Business Models Matter

Business models matter. Consider that global mobile ad spending will probably reach $69 billion in 2015, up from just $19 billion in 2013, according to eMarketer. Mobile will account for more than 50 percent of all digital ad expenditure by 2016.

But the next version of Apple’s IoS will allow its device users to block ads, though that will not be the default setting.

For Apple, which makes its money from devices, ads are seen as content elements that degrade end user experience.

For Google, Facebook and many content providers, ads are a primary or important revenue source. The estimated loss of global revenue due to blocked advertising during the first half of 2015 was $21.8 billion, according to Pagefair.

Ad block usage in the United States resulted in an estimated $5.8 billion in blocked revenue during 2014. It is expected to cost $10.7 billion in 2015 and $20.3 billion in 2016.

Globally, ad blocking is expected to result in a loss of $41.4 billion in potential ad revenue by 2016.

Use of ad blocking software is increasing. Globally, the number of people using ad blocking software grew by 41 percent between 2013 and 2014, according to Pagefair.

Ad block usage in the United States grew 48 percent in 2014,  increasing to 45 million monthly active users (MAUs) during the second quarter of 2015.

Ad block usage in Europe grew by 35 percent in 2014, increasing to 77 million monthly active users during the second quarter of 2015.

Precisely how much change will be necessary for users of ad-supported business models is unclear at the moment. But there will be stress.

48% of Former Qwest Households Can Buy 40 Mbps Internet Access, CenturyLink Says

About 48 percent of urban households in former Qwest local telephone service areas now served by CenturyLink can buy 40 Mbps Internet access service, compared to about 20 percent of households in rural areas, CenturyLink has reported.

Those improvements, and related upgrades to support gigabit speeds and entertainment video will be crucial for CenturyLink, which in its second quarter of 2015 lost high speed access accounts. To be sure, the second quarter historically is seasonally low.

But that hasn’t stopped other Internet service providers--nearly all cable TV companies-- from adding net customers. Just about all the larger U.S. telcos actually lost customers during the quarter.

If one assumes consumer segment growth is possible primarily in the high speed Internet access and entertainment TV services, Internet access account growth arguably is crucial, as Prism video services generally require the faster speed access services.  

CenturyLink Consumer Segment Accounts
			June 30, 2015	June 30, 2014
Operating Metrics (thousands)
Broadband subscribers			6,108	6,055
Access lines			12,109	12,707
Prism subscribers			258	214
source: CenturyLink

U.S. Internet Service Provider Net Additions, Second Quarter 2015
Firms	Subscribers at End of 2Q 2015	Net Adds in 2Q 2015
Cable Companies
Comcast	22,548,000	179,000
Time Warner Cable	12,770,000	189,000
Charter	5,294,000	86,000
Cablevision	2,781,000	14,000
Suddenlink	1,180,800	(2,800)
Mediacom	1,051,000	10,000
WOW (WideOpenWest)	713,100	(8,900)
Cable ONE	497,036	457
Other Major Private Cable Companies*	6,640,000	45,000
Total Top Cable	53,474,936	511,757
Telephone Companies
AT&T	15,961,000	(136,000)
Verizon	9,221,000	(25,000)
CenturyLink	6,108,000	(9,000)
Frontier^	2,388,500	29,000
Windstream	1,120,800	(11,600)
FairPoint	317,100	(1,278)
Cincinnati Bell	275,100	2,400
Total Top Telephone Companies	35,391,500	(151,478)
Total Broadband	88,866,436	360,279

Sources: The Companies and Leichtman Research Group, Inc.