Google And Apple Will Benefit From The Ad Block Market Surge

  • Apple has lately enabled ad-blocking apps on its mobile operating system.
  • This ignited an intense competition to lead this evolving market.
  • Google might use this opportunity to increase its ads revenues, and other internet giants might follow.

In a revolutionary move, technology giant Apple (NASDAQ:AAPL) decided to enable the ad-blocking technology on its new mobile operating system. Apple has come to realize that this emerging technology niche that is widely used on other platforms has a very strong demand by users who are looking to avoid increasing amounts of advertising on their phones. As shown in the chart below, demand for ad blocking apps has increased significantly in recent years among PC users who are somewhat correlated to the boom in online advertising technology market. While the PC market was a heavy user of ad blockers, mobile devices were absent from this market. As mobile ads are growth engines for many online advertising firms like Google (NASDAQ:GOOG), Yahoo (NASDAQ:YHOO), and Facebook (NASDAQ:FB).

AAPL_Chart 4_100815

Demand for the iOS dedicated ad blocking apps exceeded expectations with more than 600,000 downloads recorded for the ten most popular apps, as shown in the chart above. This download wave of ad-blocking apps could impact Apple’s rival Google directly, as most of its revenues are generated from online advertising and iOS ads are a significant portion of the mobile ads revenues for Google. However, it is not that clear whether Google will be impacted by this move in a substantial manner.

First, ad-blocking apps will enable whitelists  of "approved" ads that will be displayed on a mobile device that downloaded a particular ad-blocker. These whitelists enable chosen advertisers who paid the ad-blocker to bypass the ad-blocker and display their ads on a device almost exclusively as most of the other ads have already been removed. An exclusive display is a highly valuable feature for an ad, and advertisers will probably pay to receive that premium service. This will not create an ads-free iPhone but adds another layer for companies to benefit from mobile ads. To even be able to use this service, advertisers still need to advertise online, probably through the biggest network – Google. This process will impact advertisers more than it impacts Google as they will have to pay a premium for ad-blockers to join their whitelists, and they don’t have enough power to challenge Google’s prices.

Ad Networks Can Enter The Ad Blocking Market

Second, major advertising networks like Google and Yahoo could penetrate this market and benefit from the whitelists fees on top of the regular pay-per-click revenue. As an example for the developments in this market, an anonymous buyer acquired the popular AdBlock Plus app. This mysterious acquisition raised many concerns about the identity of the acquirer and its intent to change the whitelist mechanism. The rumors about Google paying ad-blockers to exclude its ads from their lists is nothing new, however, as this new mobile ad-blocking market evolves, Google could simply acquire one of the biggest players, enable its ads through this ad-blocker, benefit from the additional fee and actually increase revenues from this new market.

As different ad-blockers aim to block in-app ads like Facebook, LinkedIn and Twitter, these companies might become players in this market to enable their ads on popular ad-blocking apps. As this market evolves and attracts more attention from the internet giants, I see a bigger chance for acquisitions in this market and even partnerships among leading advertisers to join forces and become leading players in this industry.

Apple Is A Clear Winner

However, there is one company that benefits from these ad-block wars no matters what, and it’s Apple. Most ad-blockers cost between $0.99 and $3.99, and Apple gets its share of each download. If this market becomes more popular, Apple will benefit more, and in case this market wind downs in the future, Apple will just return to its entry state after it invested minimal efforts to enable this new (and small) revenue stream.

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