UK Three, Three Italy opt for network-level ad blocking in name of consumer; but, who really wins?

By Jim O'Neill on Feb 23 2016 at 3:30 AM
UK Three, Three Italy opt for network-level ad blocking in name of consumer; but, who really wins?

A pair of European mobile carriers are signing on to block ads to mobile devices at the network level, a move that will potentially disrupt the business models of website publishers and app makers who rely on ads to support their content.

UK Three and Three Italy say they plan to utilize technology from Israeli firm Shine, which has been deployed in the Digicel Group’s network in some parts of the Caribbean since last autumn, that block ads at the server level.

The move, said Three in a statement, is designed to help consumers avoid data overages and paying for content they don’t want to see. And, it said, consumers do have the option of allowing ads to be shown on their device.

Still, the Interactive Advertising Bureau Europe on Friday said ad blocking could undermine ”media diversity and independence in Europe.”

The IAB also contends that ad blocking violates – in principle, at least -- net neutrality, in that it specifically treats ads differently than other content. But critics note that E.U. neutrality rules allow “fast lanes” while banning many forms of online traffic discrimination and contend the rules are too weak to ensure net neutrality.

Part of Digicel’s rollout of the ad-blocking technology in the Caribbean was delayed in November when regulators, the Eastern Caribbean Telecommunications Authority, ruled the ad blocking did, in fact, violate net neutrality rules and was illegal. But, earlier this month Digicel completed its deployment without regulatory opposition. It’s been operational in other parts of the Caribbean since October.

While carriers point out that ads can eat up a significant portion of a users’ data and have claimed the high road, the reality is that as with ad blockers on the fixed Internet, not all ads are blocked.

Advertisers can pay Digicel through a revenue sharing agreement to allow their ads to be seen, opening up a can of worms in the process, said Sorosh Tavakoli, SVP of Adtech for Ooyala.

“There’s an awful lot unclear about how this will work,” Tavakoli said. “What they say is that advertisers need to pay for the data they use and they need to pay to get their ads through to viewers. And then, there’s a revenue share.

“So, what should a Three subscriber expect?” he said. “They expect ads to be blocked but suddenly ads will start to appear and the more successful they are at negotiating with publishers, more and more ads will come through… it’s just very confusing.”

It becomes even more confusing when you add sponsored content, product placements and interactive advertising.

“Who really gets to decide what goes through?” he said. “Who decides what’s ‘meaningful content’ and what should be blocked?”

The ad blocker debate also has been fueled by mobile operators who have expressed annoyance as mobile video’s popularity has grown, complaining that digital media companies are getting a free ride on providers’ high-speed networks without having to invest in them or to build out infrastructure.

But, noted Tavakoli, the popularity of the smartphones and tablets that are fueling mobile operator growth are being used extensively, in large part, because of the amount of content, especially premium content, making its way online.

“That content is often ad supported, and if you block those ads, what’s the rationale for publishers to continue to make it available?” he said. “Creating and acquiring premium content is expensive. Will publishers have to resort to keeping their content off mobile networks that use a network-wide ad blocker? Perhaps. But, then everybody loses, especially the consumer. This technology is an overreach, it’s too extreme and it, literally, could change the Internet in a very negative way.”

Ad blocking also has been a bugaboo on fixed broadband networks where upwards of 150 million users use a variety of software to block ads while browsing the web.

Estimates place the amount of income lost to publishers at more than $22 billion in 2015 – and more than $40 billion in 2016 -- because of ad blockers; some content providers now block users employing ad blockers from viewing their content.

In a statement, Three – which is the parent of both UK Three and Three Italy – said it didn’t want to eliminate mobile advertising, “which is often interesting and beneficial to our customers, but to give customers more control, choice and greater transparency over what they receive.”

It told the Wall Street Journal the technology would improve customer experience and pointed out that ad delivery made up some 20% of data traffic during its testing.

Shine’s shareholders include Horizon Ventures, which is the investment fund operated by Li Ka-shing, who also controls Hutchison Whampoa, one of the world’s largest telecom companies.

In the U.S., meanwhile, both Verizon and AT&T are taking a different tack, looking to create streams of sponsored content, paid for by content owners and brands as a way to hedge against data costs to the consumer.

Stay tuned.

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