In my last INMA Satisfying Audiences blog post, I discussed how publishers balance the quantity of audience impressions with the quality of content and user experience to maximise digital revenue. The balancing act requires an integrated pricing and product strategy.

If the subscription price is too high for a digital product with a poor user experience — which is often the case when advertising revenue has historically been the primary revenue source — the adoption of digital subscription offers will be abysmal. Indeed, across the industry, the challenge of selling digital subscriptions has been the greatest obstacle faced by newspaper publishers as they transition to a primarily digital business model.

Using adblockers, readers are more likely to remain engaged with content.
Using adblockers, readers are more likely to remain engaged with content.

In this blog post, I would like to share an insight from our capture of very granular digital data on audience behaviour, audience revenue, and advertising revenue at dozens of newspaper Web sites around the world. This is relevant to the publisher’s dilemma.

The insight is that users running adblockers consume more than four times more pageviews than the average visitor to Web sites.

Across our current data set of about 50 newspaper Web sites, the number of customers running adblockers is about 5.7%, which is consistent with other measurements. (The percentage tends to be higher for national or regional publishers and lower for local publishers.)

The surprising finding was that these users consume 24.3% of the total pageviews. These adblocking users consume more than four times the number of pageviews per user than the average visitor.

Why is this the case? There are two possible reasons.

1. Adblocking users are very engaged with the content, and they do not want advertising to interfere with their user experience. So they install an adblocker.

2. They installed an adblocker on their browser and then consume more pageviews because the user experience is much better for them than the average visitor not running adblockers.

Which direction does the causality flow? Does the engagement come first, or the quality user experience? Likely, it is a mix of both reasons.

First, a note about the data. These data come from work Mather Economics is doing with news media industry groups in benchmarking digital metrics.

To date, there has been a lack of industry data on digital business activities where the metrics are commonly defined, collected, and reported. We are launching a digital benchmarking product in May of this year in collaboration with a news media industry association in the United States using data-capture technology we have developed.

What is unique about this data is that it provides individual-user level observations on content consumed, advertising impressions viewed, and the advertising revenue received from those impressions. If that user is a known individual, information on his subscription status, delivery address, demographics, and other data can be added.

This unique data set can determine if an individual is running an adblocker not by observing the adblocking software directly, but by observing individuals who have received viewable impressions without generating any advertising revenue.

This method has the advantage of staying away from the arms-race between adblocking browser extensions and adblock detectors, which can lead to false-positives or poor user experience issues. This data can also exclude bots and other non-human pageviews and impressions from the analysis.

Adblocking users are analogous to the peer-to-peer music file sharing users in the pre-Apple iTunes digital music era. Where there is demand for a product or service, users will find a way to obtain that product or service if the benefits of doing so are greater than the expected costs.

It is unrealistic for digital publishers to expect users will not seek a better user experience in the face of growing advertising when adblocking software is so readily available at minimal cost.

In addition, there is no legal requirement for users to view ads. The ad-serving/ad-viewing exchange between publishers and readers is a social compact without legal force. A challenge to this compact is that publishers increasingly do not control the digital ad experience due to the complex programmatic advertising ecosystem.

What has evolved is advertising that detracts from the user experience in its own right and through the increase in the load time of Web sites where it is served. These problems are particularly challenging on mobile sites, where much of the growth in digital advertising and content consumption is occurring.

In an article in the New York Times, “The Cost of Mobile Ads on 50 News Websites,” Gregor Aisch, Wilson Andrews, and Josh Keller found more than half of the data from the mobile sites came from advertising.

The authors determined the average cost of a megabyte of data on mobile data plans in the United States is about a penny. At that cost, if a user were to visit the mobile news site for one particular U.S. publisher every day for a month, the cost would be about US$9.60 in data usage.

What are the implications of the improved understating of adblocking users and their share of pageviews for news media and other digital publishers? Just as music producers were forced to embrace digital music purchases due to customer demand, digital publishers need to offer quality user experiences for those visitors who want them.

The advent and popularity of adblockers is a response to a failure on behalf of digital publishers to offer products in a format and user experience consumers want. Once consumers can purchase the user experience they are seeking, then the problem of adblockers will go away, just as P2P music sharing has declined.

It is unrealistic to assume digital publishers can monetise all the pages currently being delivered to adblocking users, just as it is unrealistic to expect GM to sell the same number of cars if it raises the price. It is possible, however, to expect there is potential revenue from compelling ad-lite or ad-free subscriptions.

Several publishers are offering ad-free or ad-lite subscriptions, including Wired magazine and the Mirror in the UK. Mather Economics has been working with Ryan Nakashima, a John S. Knight Journalism fellow at Stanford University, on optimising an ad-free subscription offer price.

Nakashima has developed, in collaboration with a professor, a Monte Carlo simulation model. And we are in discussions with several publishers to pilot an ad-free subscription product.

These pilot projects should provide insights into how best to incorporate ad-free/ad-lite offerings into a digital product family, which will be a further step in the path toward solving the digital publisher’s dilemma.