Don't Turn Strength Into Weakness

For some time now, the publishing world has been crying foul over the growing power of ad blocking software products. Several studies suggest that as many as 50% of all online users have some ad blocking software installed. Some see this as a death knell for the industry, which is already struggling to maintain viability living off so-called “digital dimes,” a term to describe how much less lucrative online advertising is compared to traditional print advertising which is in decline.

One of the more prominent ad blocking software tools, Adblock Plus, which is published by a German company called Eyeo GmbH, is somewhat less militant than some its competitors, and has come up with a concept called “acceptable ads” that allows specific advertisements to be whitelisted. Some third-party research has concluded that nearly one-third of all U.S. Internet users may be using AdBlock Plus.

Ad blocking software that allows some ads to appear? It may seem odd, but that’s what Adblock Plus does. And how does Eyeo decide what ads are acceptable? Well, that’s where things get really strange. You see, Eyeo will accept payment from “larger organizations” in exchange for whitelisting their advertising. Don’t ask about the specifics of these deals because they are not disclosed. Not surprisingly, some publishers refer to this as a “protection racket.”

If you’re starting to see that Eyeo is compromising its entire brand promise, hold onto your seat. That’s because Eyeo has just rolled out its own real time bidding platform for whitelisted ads. Yes, the company that built its business blocking ads is now in the business of selling ads!

Eyeo justifies all this is by allowing users to click on any of the ads Eyeo serves to them to rate them. How users rate various ads will determine what ads they see in the future. This ostensible innovation is supposed to make this initiative palatable to Adblock plus users.

You probably already see the issue. Having built a popular tool to block ads that may be used by as many as a third of all Internet users, Eyeo has a chokehold on almost every ad-supported website, giving it tremendous market power. And it exercised that power by accepting payments to allow ads to slip through its blocking software. It’s an approach that isn’t totally satisfactory to either Adblock Plus users or website owners. My experience has been that when you are not absolutely clear who your customer is, things end badly. It’s one thing to be a marketplace where you match buyers and sellers for a fee. It’s entirely another thing to try to get paid to match reluctant sellers to reluctant buyers. Indeed, it’s not even clear that what Eyeo has is even a marketplace at all.

The object lesson here is that having tremendous market power is always a two-edged sword and thus must be handled with extreme care. The more greedily and ruthlessly you wield your market power, the more likely you will ultimately lose it as you offend all the various constituents in your market. Through its actions, Eyeo may be sowing the seeds of its own demise. There’s a lesson here for data publishers.