[caption id="attachment_93843" align="aligncenter" width="1299"] Shine's 'before and after' visualisation of ad-blocked mobile sites and apps[/caption]
Mobile operators are planning to block mobile ads on their networks. That was the report in the Financial Times – and at first glance it looks like a proclamation of doom for the mobile advertising industry. On closer inspection, however, this might not be quite the earth-shattering development it first appears.
Israeli tech firm Shine does appear to be in talks with a number of operators to deploy its mobile ad blocking solution at their data centres, effectively deleting any display ads served over the operator's mobile data connection, both on the mobile web and in apps – and at least one of these operators is set to introduce the ad blocking in “the next few months”, according to Shine CMO Roi Carthy.
Initially, operators adopting Shine's technology sounds like the logical result of the tensions between operators and the providers of OTT services such as Facebook and WhatsApp. “If you can't beat them, block them,” as Jon Hook, VP advertising strategy at Phunware, put it.
According to an operator executive cited by the FT, the ad blocking technology could be used to “bring [Google] to the negotiating table”. To achieve this, the operator is reportedly considering blocking Google ads “just for an hour or a day” – a measure which one ex-Orange executive we spoke to described as “ridiculously petty” and “antagonistic”.
Who's on board?
However, for this to be truly effective, it would have to happen on a huge scale – and it's currently not clear exactly which operators, or how many, are intending to implement this technology. The FT cites one European operator which is planning to start blocking ads before the end of the year. Carthy told us Shine has a “plural” of operators on-board, but declined to discuss number or name any of the operators it is working with.
This leaves the actual number of involved operators wide open. We contacted the UK's four mobile network operators to establish whether they are involved. At time of writing, two have responded. A spokesperson for 3 confirmed that, despite its link to the business – Li Ka-shing, chairman of parent company Hutchison Whampoa is an investor in Shine – it does not use Shine's technology.
Dan Rosen, director of global advertising at O2 parent company Telefónica, said: “We are always exploring new ways to give our customers a better mobile experience and Shine has an interesting model that could give people more choice over the advertising they see. However, to date we have not had any conversations with Shine and I recognise there could be many issues with an approach that takes a wholesale approach to ad blocking across a mobile network. ”
While it's not difficult to interpret the FT article as a sign that operators are banding together to fight back against the likes of Google and Facebook, it seems clear that, if operators do start rolling out the technology, it will be on an individual basis – “there's no collusion,” Carthy said.
This is inevitable, as any collaboration between operators would be faced with serious scrutiny for anti-competitive practices, but having a lower number of operators on-board could curb the effectiveness of ad blocking as a point of leverage with the tech giants.
“If it's only going to be a few operators involved, then it's not going to bring the big boys to the negotiating table,” commented Somo chief strategy officer Ross Sleight, describing the rumoured plans as “a warning shot which won't really be heard”.
Limitations and legalities
Regardless of the number of operators involved, there are a number of limits on exactly what is blocked by Shine's solution. The technology also only works for ads that are delivered to the device using a cellular data connection, meaning that any apps or sites accessed over wi-fi are not covered.
Shine's blocking technology also only covers display advertising. Carthy told us he “couldn't currently comment” on Shine's ability to block search ads, but it does apparently covers video ads.
One thing the company certainly doesn't block, though, is native advertising – either in-feeds ads as used by Facebook and Twitter, or the kind of sponsored articles seen on sites like Buzzfeed – and, according to Carthy, “nor have we been asked to”.
As Somo's Sleight points out, these new formats are the largest growth areas for mobile advertising, leaving the kinds of banners that Shine is talking about blocking in the dust. According to the IAB's ad spend figures, across desktop and mobile display accounted for just 32 per cent of all digital ad spend in the UK during 2014. That still adds up to a whopping £2.3bn – but over 60 per cent of that (£1.4bn) came from social and native ads, the majority of which seemingly would not be blocked by Shine's technology.
Nevertheless, it seems likely that any attempt to introduce ad blocking technology at this scale on mobile would face a legal challenge from ad industry heavyweights – in particular Google, which seems to be singled out as the primary target of Shine's ad blocking.
A spokesperson for Google told us the company wasn't willing to comment on how it would react if these plans went ahead, but shared the following statement: “People pay for mobile internet packages so they can access the apps, video streaming, webmail and other services they love, many of which are funded by ads. Google and other web companies invest heavily in developing these services – and in the behind-the-scenes infrastructure to deliver them.”
The ad blocker may also face regulatory trouble in the EU and US regarding 'net neutrality' laws, which state that service providers must treat all data on their network equally, regardless of its source. Shine's Carthy denied that this would be an issue, hinting that operators – who ultimately would be responsible for how the technology are used – had already put their legal departments on the case.
“If this was a deal breaker, we wouldn't have reached where we are now,” he said.
Ads = malware?
Shine believes it is acting in the interests of consumers who, in Carthy's words, “have a right to ad blocking”. The company claims that ads can consume between 10-50 per cent of a subscriber's data usage, while also slowing load times and eating into mobile device's all-too-limited battery life.
Shine started out as a malware company before pivoting to focus on ad blocking, and Carthy says it sees most display advertising today as just another type of malware. “The fact of the matter is that ad tech has gone unchecked for too long,” he said.
What about concerns that ad blockers denying revenues from online publishers? Carthy argued that it would merely necessitate an evolution in business models, as publishers have done already in the move from print to online.
“This industry prides itself on innovation when it's convenient,” he said, “but it also has to innovate when it reaches challenges.”
Whether Shine truly is an arbiter of this change, or merely a thorn in Google's side – or, as one source we spoke to suggested, a canny manipulator of the PR machine looking to raise its profile ahead of the next round of funding – remains to be seen. Either way, it should make interesting reading over the coming months as this story develops.