“I’ve got something to show you,” I told Horace Dediu as we chatted the other day. “I think it’s a logistic curve.”
Dediu’s face lit up. He of course is the one who has predicted smartphone adoption in the US with remarkable accuracy by using the straightforward maths of the “diffusion curve”, or “logistic curve” as it’s also known. That’s one up there at the top in yellow.
The logistic curve can be used to model all sorts of things: disease, populations, growth. It’s the integral of the bell curve (in blue at the top), and so it’s about “normal” populations.
Dediu has built a terrific series of presentations around data he has collated about the adoption of various technologies – refrigerators, cars, PCs, tablets, microwave ovens, smartphones. Pretty much all of them follow a logistic curve. There’s a slow uptake at first as only those in the know find out. Then there’s a sudden takeoff, and a rush that then leads rapidly upwards, until you come to the laggards who are the last to hear, or the least willing to adopt. (Don’t hassle me with your science oven.)
The graphic I wanted to show him? Adoption of adblocking. The picture below, taken from the Wall Street Journal’s writeup of the Pagefair report, shows the classic inflexion point of adoption: the rapid upward sweep that keeps building.
Question is, how big is it going to get? You can fit the diffusion curve to this data in lots of ways.
The optimistic view takes the sheer number, and gives it a straight-ahead fit.
This looks quite encouraging for those worried about the adpocalypse. The current number of adblock users is 200m, and it looks to be about halfway up the curve, so that’s 400m total once it saturates. OK, not great, but tolerable.
Dediu himself wrote a commentary this week, wondering about what has taken adblocking so long to take off:
What we never know is how quickly diffusion happens. I’ve observed “no-brainer” technologies or ideas lie unadopted for decades, languishing in perpetual indifference and suddenly, with no apparent cause, flip into ubiquity and inevitability at a vicious rate of adoption.
He argues that for takeoff, you need both a “push” and a “pull”. The push has now happened with the availability of adblockers easily installed via the App Store; now he wonders how fast the “pull” from users will be.
(I think, actually, that the key push happened before that, in mid-2013: that’s where that Pagefair curve suddenly moves upward. What happened in mid-2013? The Snowden revelations about tracking by governments. I don’t think the rise of adblocking after that point is a coincidence.)
That graph above might say “well, quite soon we’ll be done, and it’s not going to be that bad.” Ah, but we’re not done. When I showed the WSJ graphic to Dediu, he said “OK, but you have to adjust for internet population.”
While the number of adblocker users has been growing, so has the total internet population. Adblocking as a percentage of total users hasn’t grown quite so fast. Arguably, people in countries such as China and India who are on mobile more than PC have a greater incentive to adblock than people on unmetered desktop systems.
Here’s how that growth chart looks like when you present it as a percentage of the internet population (data sourced from internetworldstats.com):
And now with the diffusion curve roughly fitted to it:
On this graph, 200m users adblocking is perhaps 10% of those who will eventually use it. So yes, we’re saying that 2bn people could be adblocking eventually. Which would leave us wondering, as Dediu puts it, “how quickly will ads disappear from the internet?” (The current internet population is about 3bn users.)
Put it another way:
the data suggests there are going to be between 400m and 2bn adblocking users within a few years.
OK. How much is that going to lose? Or put it another way, using data we can adduce: how much are visitors to ad-funded websites worth at present?
The value of a reader
Below, I’m going to use data from The Guardian, because it’s easily available (not because I’m a contributing writer). I’d welcome figures from another other news site such as the New York Times or Washington Post.
In March 2014, the Guardian hit 100m browsers for the month. In July 2014 it managed 137m. (“Browsers” aren’t the same as “views”, nor the same as “users”. A single browser could do multiple page views; a single user might use multiple browsers, such as a mobile one and a desktop one at different times of the day. If you’re feeling wonkish, the Audit Bureau of Circulation has more data at appendix 2.1 of its measurement requirements: “This metric measures each browser on a given device; it does not measure a person.”)
There’s a spreadsheet with the past year’s figures for browsers for the main UK national papers.
According to that spreadsheet of ABC-audited browser figures, in the ten months from June 2014 to March 2015, the Guardian’s average monthly browser figure was 111m.
So how does that compare to its digital revenues (which are broken out separately from print)? I’ve chosen the Guardian because its browser stats are available, and there isn’t any confusion caused by a paywall. But there are a couple of confounding elements:
• its “membership” scheme. I’m assuming there’s no significant income from that compared to the number of visitors. This is a gloss; the income from “membership events” is definitely non-zero.
• there’s a Guardian app for iOS and Android, which offers in-app purchases (IAPs) ranging from £3.99 to £11.99, including six- and 12-month subscriptions (£3.99 and £4.99 respectively). We don’t know how many of those have been downloaded, nor what the average payment is. Obviously it’s non-zero, and might materially affect our assumptions.
• the Guardian has “sponsored content”, which again is definitely non-zero in revenue terms – it has signed at least one deal worth a million pounds. This will reduce the contribution from plain advertising.
GNM [Guardian News and Media, the publishing arm] total revenue grew by 2.6% to £214,600,000 (2014: £209,000,000) with increases in digital and new product revenue more than offsetting declines in print revenue. GNM divisional digital revenue for the year increased by 20.1% to £82,100,000 (2014: £68,300,000).
If you assume every month was equal, that’s £6.84m per month in digital revenue. If you assume 111m browsers per month on average, that’s 6.16p for each “browser” visit (which isn’t, remind yourself, necessarily a user or page view; a browser might be part of a user, and might do multiple page views. So if you view it on your desktop, and then on your mobile, that’s two “browsers”; the Guardian gets 12.32p from you).
My impression, not knowing much about monetisation, is that the Guardian is monetising its visitors pretty well. Others who know the ad business better can update me.
Spread across a year, that’s 73.95p per browser. In other words, £0.74, or $1.14 per browser per year.
Note that there’s going to be gigantic variation in the actual value to the Guardian of those “browsers”. If it’s the same 111m browsers visiting each month then that might be as few as 55 million people (“few”, huh) around the world, or even fewer if they’re showing up as more than two browsers – perhaps they view the site from a work PC, then their mobile on the train, and then their tablet and their home PC at the end of the day.
Or it might be 111m different browsers, each run by a different person, each month – so 1.330 billion people. As that latter figure is pretty much half the internet population, we can say with certainty it’s not true.
Given that £0.74 per year average figure, it’s pretty clear that anyone who subscribes to the Guardian app is way more valuable than the average. Anyone who accesses by more than one method (mobile plus desktop) is more valuable than the average.
But the average is really pretty low in sheer monetary terms, and that’s with the best that the advertising business has to throw at people – and that’s before we subtract the income from the app, the membership scheme, and the sponsored content, which probably come to a few millions.
All in all, you’d have to say that the per-browser value of you, as an individual who doesn’t have the app, isn’t a member and isn’t reading sponsored content (actually you don’t care about the latter – the Guardian gets paid for it anyhow), is probably pretty low; maybe in the 5p per browser range, or 60p per year.
Take that spread
Spread that figure across the 400m people in our optimistic take on adblocking, and you have £240m taken out of the online advertising business. That’s doesn’t sound very much – except each of those people is abstracting their per-site payment at every site. So you have to multiply that impact across every site that those 400m people go to. How many ad-supported sites is that? Well, 400m is about 12.5% of the internet population. Basically, slice 12.5% off the ad income. For some, that might make the difference between positive and negative.
It’s trickier if you take the pessimistic outlook and assume 2bn people take up adblocking, because that’s two-thirds of the current internet population. It would have become such a mainstream pursuit that the online ad business would have been destroyed.
For a news site getting 60p per year on average from users, but seeing that inevitably being eroded by adblocking, the obvious path is – since you can’t beat ’em – to join them from the front by making an adblocker and selling it. Disrupt yourself before others do. A one-off price of £1.29, say, would yield 90p after Apple’s 30% cut; that’s 18 months of your “lost” ad-supplied visitor paid for. (Yeah, yeah, you have to support the app too. Perhaps IAPs? Easily switchable settings to allow the ads on your site? Ways for people to vote on ads they do and don’t like which gets fed back to you, the publisher, rather than invisibly back to the ad networks which will ignore it?)
In that 18 months, you might be able to figure out a better business model, because there’s no reason this should get smaller. iOS is a key platform, and adblocking apps are already taking the food out of news sites’ mouths – to the tune of probably a million pounds in less than a week.
Again, that might not sound like much; but every single time those users visit those sites in future, they’ll not be making themselves available for monetisation. An adblocker is a one-off purchase, but its effects are repetitive.
Who’s to blame? Make no mistake: using an adblocker is a natural reaction to the intrusive, annoying, and even dangerous ad-tech industry. Concerns about tracking have amplified it, and created a perfect storm. It’s the ad industry’s own fault.
Sure, you can argue that people shouldn’t use adblockers on your site if they love you. But lots of people might love your site, but consider the ads an unacceptable intrusion, because you didn’t choose them. They just got inserted, often by a real-time bidding process choosing from inventory matched against the tracking profile of you (which could have your age, gender and interests completely wrong).
So the diffusion has begun. Quite where it ends, we don’t know. I do know though that I’m very much looking forward to Pagefair’s next report on the size of the adblocking market.