Online advertising losing its sheen as a revenue option

by Shweta Verma    Sep 02, 2013

online ad

Last year General Motors decided to pull out all its ads on Facebook saying online advertising doesn’t have much of an impact on their business. In revenue terms, this would have meant a loss of about $10 million for Facebook, but the impact was far more serious. Analysts say that GM’s decision coming just before Facebook went public could have been a major reason why the IPO did not live up to the expectations.

Apart from its inability to provide the desired business outcome, online advertising has also been affected by another worrying trend – adblocking. Adblocking or use of anti-advertising technology is fast catching on and posing a serious threat to the viability of online business models.

Ad-less sites a reality?

A recent report by PageFair shows that almost 30% online visitors are blocking ads, and the number is increasing rapidly at 43% per year. The report even goes on to say that the way this trend is growing it is possible that almost all sites will appear without ads by 2018.

Experts point out that online users are far more tech savvy than TV viewing audience and marketers cannot easily fool them by plugging ads anywhere and everywhere. These users generally log on for specific activities that range from gaming to social networking or searching for information. Online ads are generally seen as ‘unwanted interruptions’ and they have found their own ways to zip past them.    

The PageFair report also depicts the average adblocking rate across different categories of websites. According to the report, the worst affected sites are those that target more tech savvy audiences, such as games and technology sites. More than 25% of the visitors to these sites block advertising, with some sites experiencing rates in excess of 50%. Sites general interest websites - such as sports, news, and business are facing adblocks from 16% users.

“We have found that website publishers tend to significantly underestimate the effect of adblocking on their businesses. Most frequently, they assume that only a small, single-digit percentage of their visitors block ads. Our results show that in nearly all cases, this is wrong,” states the report.

On a sticky wicket

With questions being raised on online advertising as a sustainable revenue option, digital companies are on a sticky wicket. Parameters like page views, downloads or unique visitors have also not been able to establish a very clear correlation with brand impact.

Companies are exploring various other options to engage with customers, create interactive tools and business models that can sustain in the long term.