This year's Key Digital Trends report by Marshall Manson and James Whatley from Social@Ogilvy highlights one point of pressure for Google and Android that will have to be addressed in 2016, namely the impact of adblockers on Google's mobile business. Not only does it have an impact on Google's revenues from smartphones, Apple is subtly applying pressure to distort the market away from ad-supported online properties and depress Google's inventory.
Adblocking is on the rise, with year-on-year growth of thirty-five percent in Europe and forty-eight percent in the US. Knowledge of the ability to run an adblocking software has grown, along with the distribution of the Chrome web-browser and the easy use of adblocking extensions. Social@Ogilvy's figures (detailed below) were obtained before Apple debuted adblocking in iOS 9, so the real figure may now be much higher.
Strictly speaking, Apple did not launch an adblocker for its mobile devices, it simply provided the hooks in iOS 9 for third-party developers to release adblockers that run on the iPhone and the iPad. Which they did, and those apps promptly dominated the iTunes download charts. Be it to reduce page-bloat, to speed up loading times, or to protect privacy, adblocking technology is now part of the landscape on mobile devices as well as the desktop.
Manson and Whatley highlight the rise in apps such as Flipboard, Instant Articles from Facebook, and Apple News. These services (and others) aggregate news and minimise the ad experience. It provides a way for publishers to reach a target audience in an environment where users are more comfortable.
It also puts the content and the users further away from Google's core advertising products. Publishers have to deal with the reality of adblocking (Lewis DVorkin talks about Forbes' approach to mobile here), is Google ready to do the same with Android?
Samsung Galaxy S6 Edge (image: Ewan Spence)
There are three strikes that are damaging Google's position in the advertising space right now. The first is the loss of the deskbound computer as the primary interface to the web. There's no doubt that Google mastered advertising to the desktop users and that gave it huge resources. It has not yet mastered a product for mobile. Secondly, mobile advertising rates are lower, no matter the product. Even with a magic wand based solution, Mountain View cannot make as much from a mobile user as it could a deskbound user. As more of the world's connected users switch to mobile, their value to Google decreases as it becomes harder to reach the masses.
Finally, where are the high-value readers? Where are the people who advertisers want to reach? Where are the disposable income users, the people where advertising rates are higher than the average? Where are the whales that advertisers hunt?
Which is where Apple's Adblocker hook gets interesting. Before that point, Google had access to iOS users through display ads on mobile websites. With iOS 9 and the rise of the various adblocker apps, the valuable users are now seeing less advertising within the mobile browsing experience, and Apple is specifically targeting publications to switch to Apple News, which reduces the ad inventory for Google even more.
Google has less inventory and less revenue, while Apple moves more people into Apple News and monetization through subscriptions to the publications... all with the default thirty percent rake to Apple via the App Store.
Adblocking is on a rapid rise, and will have to be considered by every stakeholder in 2016. This rise, coupled with Apple's attack on mobile inventory, boxes Google in. That's not to say the task is impossible - it echoes the position Facebook was in a few years ago before the social network moves its ad sales strategy around mobile - but it requires a transparency from Google in terms of strategy, implementation, and earnings. During its last earnings call, Google CEO Sundar Pichai stated obliquely that "[mobile search] is as compelling, or even better, than desktop" but refused to talk numbers.
Meanwhile, Apple is altering the landscape of high value customers away from Google's properties and inventory, restricting revenue opportunities, and asking publishers to do the same.
The next move belongs to Google, and I'm very interested to see if it has a viable answer to Apple's squeeze
(Now read why Android's best efforts are not enough to beat Apple's iOS).
