Is adblocking a major challenge to digital start-ups?

There are few Internet businesses that do not rely at least in some part on online advertising revenues. From huge social networks to major e-commerce players, everyone is tapping into the surging Internet ad market. However, consumer-focused adblocking services are cutting a proportion of this profit, especially impacting nascent start-ups for whom ad revenues could be a clinching factor when looking to attract financing or exit through a business transfer agent.

A growing number of keen internet users who dislike pop-up ads on websites are taking action to block such ads by downloading software that removes online advertising from their daily internet activity. The prominence of so-called ad-blocking software is highlighted in a new report by two companies opposed to the software. The report, released by Adobe and PageFair, a Dublin-based start-up that helps advertisers recoup some of their lost revenue, reveals that 200 million consumers globally now regularly use such software, and that ad-blocking will lead to almost $22 billion of lost advertising revenue this year. Gaming, social network and other tech-related websites are most affected by ad-blocking software.

The report estimates that about 45 million of ad-blocking software users are in the USA, while 77 million people use versions of the software in Europe.  Companies such as Eyeo, a tech company based in Cologne, Germany, that is behind the popular Adblock Plus browser plug-in, have global followings. The start-up says it now has roughly 60 million active users worldwide, but has attracted controversy by allowing some advertisers to bypass the blocking software and regain access to users for a fee.

Recently, the focus on ad-blocking software has turned to mobile devices. The latest version of Apple’s mobile operating system will allow people to download some form of ad-blocking software. Analysts say developers are working on plug-ins for smartphone internet browsers that will allow people to block advertising on their cellphones and tablets and a huge spike in the use of ad-blockers on mobile devices is expected.

More than 140 million people, or 5% of the world’s online population, use software to block advertising. Google, Amazon and Microsoft have all paid Eyeo to stop blocking ads on their sites.Adblocking has been likened to file-sharing in its ability to undermine media companies’ online business models.

Some analysts suggest that the most effective response to adblockers may be technological rather than legal — designing websites and apps so that content does not load if adblockers are installed. The rise of adblocking is also likely to encourage the rise of sponsored content by advertisers, and of advertising-free subscription models, such as Netflix.

Germans are among the most enthusiastic adopters of adblockers. About 30% of internet users in the country use the software, compared with 25.4% in France and 13.6% in the UK, according to data gathered by PageFair.

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