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European telecoms contemplate blocking mobile ads. What’s the potential effect on Google? And Verizon?

May 17th, 2015 |  Published in Digital and Mobile Technology, General Technology, Google and the World, Telecom and broadband

Mobile operators plan to block online advertising

 

18 May 2015 – An interesting story surfaced last week that may have a big impact on both advertisers and end-users who use their phones as portals to ad-supported websites. Several European telecom providers are apparently planning to use ad-blocking software at the data-center level, which would mean benefit for users (in the form of less obnoxious advertising, and less data being eaten by it) but quite a pickle for online advertisers, and sites that rely on advertising revenue.

NOTE: ad-blocking software prevents advertisements from loading in web pages or apps. Blockers use a predetermined blacklist to determine what type of ads are blocked and on what sites. They also adjust a page’s layout so that it looks normal after the ads have been removed.

Based on a story in the Financial Times, one wireless carrier said that the software had been installed at its data centers and could be enabled by the end of the year. With the potential to automatically block most ads on web pages and within apps, the repercussion of the ad boycott could be huge as mobile providers try to wrestle control from the likes of Google.

The blocking technology was developed by Shine, an Israeli start-up whose shareholders include Horizon Ventures, the investment fund of Li Ka-shing, Asia’s richest person. Li also controls Hutchison Whampoa, one of the world’s largest telecoms groups. Shine said it was working with a number of operators, including one with almost 40m subscribers, though it declined to name them. The Financial Times article quotes Roi Carthy, chief marketing officer of Shine:

“Tens of millions of mobile subscribers around the world will be opting in to ad blocking by the end of the year. If this scales, it could have a devastating impact on the online advertising industry.”

Ironically Verizon, the largest US telecoms group, last week paid $4.4bn to buy AOL … seeking to gain a foothold in the rapidly growing market for advertising on mobile devices. And eMarketer which tracks the industry says marketers will spend almost $69bn this year on mobile ads — more than triple the sum they spent two years ago.

An executive at a European carrier confirmed that it and several of its peers are planning to start blocking adverts this year. The executive said that the carrier will initially launch an advertising-free service for customers on an opt-in basis. But it is also considering a more radical idea that it calls “the bomb”, which would apply across its entire network of millions of subscribers at once.

The idea is to specifically target Google, blocking advertising on its websites in an attempt to force the company into giving up a cut of its revenues. It is the world’s largest advertising business, generating $60bn a year from search, YouTube, and services such as Google Display Network and DoubleClick, which both deliver ads for third-party sites.

The executive at the mobile operator considering “the bomb” acknowledged that targeting Google could be risky from both a legal and public relations perspective. Under “net neutrality” rules in the European Union and the US, telecoms companies are forced to treat all data that flow through their networks equally. But even within those markets, it would be feasible to block adverts on Google “just for an hour or a day” to bring the company to the negotiating table, the executive said.

Many mobile operators are frustrated that digital media companies profit from their high-speed networks without having to invest in the infrastructure behind them. Such irritation was inflamed last month when Google launched Project Fi, its own wireless carrier in the US.

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