Google's rumored plan to develop its own ad-blocker will only help itself, its ad-business and GOOGL stock. Here's why.
Rumors have emerged, which suggest that Mountain View, California-based Alphabet Inc's (NASDAQ:GOOGL) is now planning to add a built in ad-blocker for its massively popular Chrome web browser. And the rumor has left a lot of folks scratching their heads to figure out why exactly, Google, which earns nearly all of its money from digital advertising, would do such a thing. Is Google crazy enough to do something that could kill its ad-business, and dent GOOGL stock? The short answer is, no, it isn't. In fact, a deeper look suggests that, if Google is indeed working on a built in ad-blocker, the move could be a great one for the online search giant. As a matter of fact, you'd wonder why the company didn't think of doing so much earlier. Either way, the rumored move could be part of a smartly woven strategy. Here's why.
A few quick facts about ad-blockers.
Over the last few years, ad-blockers have emerged as possibly the single largest disruptors of the digital advertising industry. With the burgeoning growth of digital media, publishers have, over the years, become increasingly dependent on online advertising as a source of income. And by virtue of its position as the gateway to the internet, Google, sits at the top of the pyramid, as the biggest enabler of digital advertising. Ad-blockers, which have grown in popularity, have quietly chipped away at this source of income for publishers and ad-networks alike. And statistics suggest that these ad-killers have become hugely popular, with some sources suggesting that as many as a third of internet users on desktops (PCs and laptops) and about 15% of mobile internet users have ad-blockers enabled.
We've seen industry experts and media houses cry themselves hoarse about the unfairness of it all. Should users be allowed to consume content for free? How are publishers expected to doll out content without being compensated for it? Obviously, somebody's going to have to pay for it. On the other hand, those who advocate the use of ad-blockers have their argument as well. Low quality publishers who abused their ability to make money off digital advertising have in part created the need for such a tool, and have themselves to blame for it. Either way, with over 615 million devices reportedly blocking ads all over the world, there's just one clear takeaway. No matter what anyone has to say, ad-blockers are here to stay.
Google's move to launch a built in ad-blocker could be a great move.
A post by Shone Ghosh on Business Insider brings to light some very important points. For starters, ad-blockers aren't running a charity, though they probably make it seem that way. Why do we say this? Let's quickly ask a very basic question. In the absence of ads, who pays for the online content that's being consumed? The answer is still the same - advertisers. Wondering how? Popular ad-blockers use their leverage as the gatekeepers to your time on web browsers, by charging advertisers to let their ads through. Quoting from the post:
Adblock Plus doesn’t actually block all ads, but charges companies like Google to allow some ads through, a process called “whitelisting”. It does this to make money.
It's actually pretty simple. By simply blocking ads, nobody makes money. By charging an entry fee of sorts, ad-blockers get to leverage their position and make money off advertisers and publishers who need digital advertising, to survive. Is that a breach of users' trust? We won't get into that debate, but what some ad-blockers are looking to do, is to evolve from complete blockers, into tools that selectively only block annoying ads that most commonly crop up on low quality sites. How do they differentiate between what goes through and what doesn't? They add advertisers to a whitelist of sorts, like Adblock Plus' “Acceptable Ads” committee. However, even after paying to enter, advertisers don't have too much control over what gets blocked and what doesn't. Quoting Lee Mathews, a contributor on Forbes:
"Google doesn't much of a say (if any) in what ads get blocked by those tools, though it does pay to be part of AdBlock Plus' acceptable ads program."
Sounds like a raw deal? it probably is. So why shouldn't Google do what these ad-blockers are doing anyway? If rumors are to be believed, the search giant is planning to do exactly that. Google's ad-blocker, which is expected to be built into its Chrome web browser, won't block all ads. According to Mathews, "It would target only certain types of ads -- like pop-ups, pre-load landing pages, and auto-playing ads with audio -- that are deemed to be bothersome to users."
What's more, Google might have yet another ace up its sleeve - its Google Contributor program, which allowed users to contribute a sum of money that would enable them to enjoy an ad free experience on partner sites that enrolled for the program. The program would compensate publishers using the funds collected from users. Google recently pulled the plug on this program, and the site now reads "We’re launching a new and improved Contributor in early 2017!" Now, this is pure speculation, but operating such a platform in combination with an ad-blocker seems like a good way to circumvent the threat from the ad-blockers that are rampant and growing in popularity. And as you'd imagine, the move will definitely help Google stock.
Google Has The Muscle To Do It.
According to reports, Google's Chrome has a billion plus users on smartphones and tablets alone, and if you look at the overall browsing market as a whole, Chrome reportedly has about 53% market share. So, clearly, Google has the muscle to effect a change. What's more, some of Google's major competition comes from Asian web browsers, most of which come with in-built ad-blockers. That could also be one of the factors pushing Google's hand. Either way, why Google waited all this while, and allowed ad-blockers to squeeze Dollars out from the search giant, is still a mystery. You'd think Google would've entered the fray sooner. Like we said, ad-blockers are here to stay, and there's no changing that. So, it's actually great that Google isn't going to sit by the sidelines and let ad-blockers call the shots in an industry it has virtually built single handedly.
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