This indifference toward advertising is particularly pronounced among younger internet users. In 2013, a controlled experiment on more than a million customers to evaluate the causal effect of online ads concluded that a customer “between ages 20 and 40 experienced little or no effect from the advertising.” This was in spite of this demographic’s proportionally heavier usage of the internet. In contrast, the study found that customers older than sixty-five, despite constituting only 5 percent of the experimental group, were responsible for 40 percent of the total effect observed as a result of the advertising.9 This result suggests that the current effectiveness of advertising may depend on an aging and rapidly disappearing segment of the population.
Skeptical minds might counter that click-throughs and sales are imperfect proxies for measuring whether ads are effective. Marketers frequently draw a distinction between “direct response” advertising and “brand” advertising. The former encourages an audience to make a purchase—by promoting a discount, for instance, or highlighting the attractive features of a product. “Brand” advertising, in contrast, is less about the immediate purchase and more about shaping the public’s associations with a brand and differentiating it from its competitors. Nike might invest in television advertising that is—at least in the near term—less intended to make consumers go out and buy sneakers and more intended to ensure that Nike maintains its status as a “cool” brand in the public eye. In brand advertising, clicks and sales are secondary to the advertiser’s goal. Even if the ability of advertising to drive clicks and sales is falling over time, there might be enough demand in brand advertising to ensure that the value of online advertising inventory remains sound.
The vaporous nature of brand advertising means that the goalposts are perpetually moving: the objective of the advertiser may not be to drive any behavioral change that is actually measurable in any sensible time frame. It becomes hard to refute the effectiveness of advertising when the bar is set so low. But one thing is certain even in the brand advertising context: if the ad is never delivered in the first place, there is no way that it can be effective. Industry trends suggest that this is precisely what is happening in the programmatic ecosystem.
The first problem is the ineffectual placement of ads on pages. The real-time bidding system might successfully load up an ad on a website, but there is no guarantee that the ad will be somewhere that a reader of the website will actually see. Ads might load at the bottom of the page outside the browser view, for instance, or they might be so small that they escape notice entirely. “Ad viewability,” as it is known in the industry, has emerged as a major concern. In 2014, Google released a report suggesting that 56.1 percent of all ads displayed on the internet are never seen by a human.10 One 2017 report by Comscore found that this problem is particularly pronounced for ads purchased through the programmatic ecosystem.11 A staggering number of those ads are never seen by anyone at all.
But the problem goes deeper than bad placement. Not only are people paying less attention to ads; they are also taking proactive steps to prevent ads from reaching them in the first place. Ad blocking grows more popular every year. One study by Deloitte from 2017 suggests that fully three-quarters of North Americans engage in “at least one form of regular ad blocking.”12 In 2016, 615 million devices around the world were actively blocking ads.13
The news for advertisers gets even worse. Trends suggest that the industry is not even able to evade highly blocked markets by delivering ads to less blocked places. Markets outside North America, where ad blocking was historically less prevalent, might have been a potential haven for advertisers. But ad-blocking growth is particularly pronounced in these emerging markets. Driven largely by the growth of ad blocking in Asia-Pacific, global ad blocking grew by about 30 percent year over year from 2015 to 2016.14
Mobile platforms might also have been a promising new frontier, given their relative growth compared to desktop devices and the lack of norms around ad blocking on mobile devices. But it turns out that mobile is where ad blocking has grown the most in the past few years. Ad blocker use on mobile devices grew by 40 percent to 380 million devices between 2015 and 2016. Fifty-nine percent of the smartphones in India implement ad blocking.15
The full economic impact of ad blocking worldwide is huge. Adobe estimated in 2015 that $21.8 billion in global ad revenue is lost each year to ad blockers.16 That’s a significant annual loss, more than all the revenue generated by Facebook that year.17 Relatively wealthier consumers also disproportionately adopt ad-blocking tools, reducing advertisers’ access to some of the most valuable audiences on the web.18 Generationally, the long-term trend is also worrisome. Ad blocking is significantly more prevalent in users eighteen to twenty-four than among older cohorts.19 Since younger users also pay less attention to ads, the advertising industry may be facing a demographic shift in behavior that will dramatically erode the viability of its existing model.
The seriousness of the threat posed by ad-blocking software to the online advertising sector can be measured by the vitriol with which representatives of the industry have responded. Randall Rothenberg, who leads the IAB, declared melodramatically that ad blocking is “robbery, plain and simple—an extortionist scheme that exploits consumer disaffection and risks distorting the economics of democratic capitalism.”20
It is worth recognizing that these arguments are about the aggregate trend of the online advertising economy. Some online advertising works, in certain contexts, for particular products. A close look at programmatic advertising does,
