Sunday 29 May 2016 7:00 am

Trials and tribulations: As Three announces a controversial ad-blocking experiment on some customers’ devices, is the technology gaining acceptance?

In June, mobile carrier Three is to conduct an ad-blocking trial on the devices of some of its UK customers. Of course, it's only a trial. Three will invite 500,000 customers to partake for 24 hours. But Three's project could set a precedent which could threaten the revenue streams of online publishers and broadcasters which rely, at least in part, on advertising. And the announcement signals a significant shift in the ad-blocking debate.

Before now, ad-blockers have operated as plug-ins which filter adverts from existing web browsers, or in special browsers, like Adblock Browser, which are expressly ad-free.

In the last year, ad-blocking has risen in popularity and has received endorsement from Apple, which controversially began enabling integration with third-party ad blockers for use on Safari last September. According to the Internet Advertising Bureau, the number of UK adults using ad-blockers rose from 18 per cent in October 2015 to 22 per cent in March. A number of media owners, such as City A.M. and Trinity Mirror have started using anti ad-blocking technology as a way to defend their online monetisation models, while others are dependent on pay-walls.

But Three's experiment signals the increasing possibility that ad-blocking will be elevated from the level of web browsers to that of mobile networks themselves. It could establish a threatening precedent for news outlets, broadcasters, advertising agencies and brands which depend on online advertising.

Network-wide?

Tom Malleschitz, chief marketing officer of Three UK, said that customers shouldn’t be forced to pay data charges to receive adverts – which account for 20 per cent of the data traffic on Three's network – and that advertisers should bear such costs themselves. He also argued that consumers' data shouldn’t be gathered without consent, nor should they have their online experience "degraded by excessive, intrusive, unwanted or irrelevant adverts".

Three's announcement has not come out of the blue. In February, the operator signed a deal with Shine, an Israel-based ad-blocking firm which allows providers, including Jamaican network Digicel, to block ads across their mobile networks. And unsurprisingly, the advertising industry has come out strongly against the project. ISBA, a trade body which represents UK marketers, has said that it would be “disastrous for the mobile advertising ecosystem” if the tech was rolled out fully across the network.

Crucially, not all adverts will be blocked. Pop-ups and ads on websites will be filtered out, but sponsored articles, pre-roll adverts – like those which run before video clips on YouTube – and in-feed promotions on social networks will be allowed through.

Three has had ad-blocking on the brain for a while now, but the announcement comes less than a month after its merger with O2, which would have gifted it 24m new customers, was blocked by the European Commission. If advertisers were forced to pay for bandwidth sacrificed on ads on its network, Three's offering could very well lure customers away from its rivals, adding to the 9m customers it already has in the UK.

Many advertising agencies think that Three has overstepped its brief as a mobile operator.

Mark Jackson, managing director at MC&C described it as “a pretty bold move for Three to play judge, jury and executioner over what content passes through its network, given that a network ‘provider’ should be just that – a provider of information, not a censor.”

However, Jackson also said that he sees the trial as a clear sign that consumers are bothered by the heavy data use of digital advertising, a sentiment shared widely across the industry. "Will [the trial] work? It’s difficult to say but it definitely serves as a wake-up call to the ad-tech sector.”

Mark Ellis, managing director of Syzygy says that ad-blocking “will undoubtedly drive higher quality creative and targeting from brands in the long-term." But ultimately everything rests on the revenue balance of the mobile operator’s commercial model. Is it customers – and added value services – generating the bulk of their revenue, or advertisers?

According to Page Fair, ad-blocking cost publishers almost $22bn last year, and the rise of native advertising demonstrates a recognition on the part of advertisers and media owners that there is an urgent problem with intrusive adverts compromising the user's experience.

The "tipping" point?

Three's isn't the only announcement to have media owners and advertisers riled this month.

One ad-blocking company, Adblock Plus, announced earlier this month that it has partnered with online donation company Flattr to offer audiences the chance to send micro-payments to the content creators they engage with most online, be they news outlets, bloggers, musicians or others.

Flattr Plus, as the product is called, will allow users to set a monthly budget, and an algorithm will ensure that sum is automatically apportioned to the owners of the sites they have visited, but only if those owners sign up to Flattr Plus's “whitelist” and receive approval. When it launches later this year, Flattr Plus hopes to attract 10m users each with a $5 monthly budget, generating up to $500m for publishers in 2017. It intends to keep 10 per cent of the revenue, with the other 90 per cent going to content creators.

Adblock Plus, whose software has been installed on 100m devices worldwide, continues to come under fire from advertisers and publishers for the controversial whitelisting policy it already operates. Its software allows the ads from certain companies through its filters, provided that they meet the terms of its “acceptable ads” criteria – namely that they are not too intrusive or disruptive to the user. The top 10 per cent are charged in order to make it onto the whitelist.

This “tipping” model is unlikely to win the support of media outlets and other content creators. By taking the ability to control their own monetisation models, media owners would find it difficult to make the significant investments needed to produce quality content. Moreover, they will be loath to put their own money making capabilities in the hands of the very ad-blocking firms which are currently holding down their revenues.