On 16 September 2015, Apple released iOS 9, which enables users of iPad and iPhone to disable ads. The company claims the capability improves the overall user experience.
As someone covering the tech industry for more than two decades, I perceive it as something else, too: Competitive assault against Google and means of pushing publishers to iOS 9's new News app. There is nothing friendly about Apple's maneuver. It is aggressive and tactical. But does it really matter?
Stated simply: More than 90 per cent of Google revenue comes from contextual and search-related advertising. Apple derives about the same figure from selling devices and supporting services. At the same time, mobile is the future of Internet advertising and the battleground where the two meet.
The entities' respective mobile platforms, Android and iOS, long ago put the tech titans on a collision course. Conceptually, what Apple can't gain from iPad and iPhone sales, it can take by shaking pillars supporting its rival's business.
Apple announced the change when introducing iOS 9 during the annual developer conference in June. Essentially, Apple will no longer, eh, block ad blockers from the iTunes App Store. Interestingly, or not, their zap in mobile Safari doesn't apply to the News app, from which Apple generates revenue.
But the company doesn't need the ad dollars, unlike Google, and risks little to nothing permitting the blockers. During calendar second quarter 2015, for example, Google reported $17.73 billion revenue and $3.9 billion net profit. Advertising accounted for $16.02 billion, or 92.7 per cent, of total revenue.
During the same time period, Apple reported $49.6 billion in sales and $10.7 billion net income. Excluding hardware like Apple TV and iPod that the company doesn't separate out in financial disclosures, devices accounted for 84.5 per cent of total revenue. iPhone's contribution: 63 per cent.
Meanwhile, Apple and Google slug one another for mobile platform supremacy. Based on second quarter smartphone sales to end users, Android's share was 82.2 per cent, according to Gartner, compared to 14.6 per cent for second-ranked iOS. For all 2015, IDC predicts manufacturers will ship 1.2 billion Android smartphones. iPhones: 224 million. Google gives away its platform but requires most licensees to include its apps, which tap into extended, ad-supported services.
One way to take on Android is to destabilize Google, the platform's primary developer.
Timing isn't coincidental. Winds of change sweep across digital advertising: eMarketer predicts that mobile will account for more than 50 per cent of spending this year, surpassing the desktop.
Purchasing habits already are changing. In the United Kingdom, for example, about one-third of retail ecommerce sales will be made on smartphones and tablets this year, the analytics firm reports. Some other numbers:
- In the United States, last year, Google accounted for 38 per cent ($19.3 billion) of digital advertising revenues, according to Pew.
- In the United Kingdom, this year, Google will account for 41.6 per cent of digital ad spending, eMarketer forecasts.
- Globally, Google will account for 54.5 per cent of search ad spending in 2015, eMarketer estimates.
Pew reveals in its "State of the News Media 2015" report that last year AOL, Google, Facebook, Microsoft, and Yahoo, "generated 61 per cent of total domestic digital ad revenue"; U.S.-only data. These five serve up most of the ads supporting the majority of content publishers.
In mid-August 2015, in conjunction with Adobe, PageFair released its annual ad-blocking report, estimating that blockers would cost publishers $21.8 billion in revenue. For context: eMarketer forecasts digital advertising spending will top $170.17 billion this year, or 29.9 per cent of all worldwide advertising ($569.65 billion).
On 19 September, in the early evening EDT, two of the three-top grossing iOS apps visible on my iPad Air 2 are ad blockers, Crystal and Purify as second and third, respectively. Yesterday's topper, Peace, is gone today. Developer Marco Arment pulled the app. He emotionally explains the decision on September 18:
But is his remorse justified? Will ad blockers really shake the digital ad economy's foundations? The tech already is quite popular. According to PageFair, globally, about 198 million users actively used ad blockers at the end of June 2015. The increase is enormous, up from 54 million two years earlier.
Ad blocking's popularity grows faster in some parts of Europe than North America. For example, United Kingdom: Up 82 per cent, year over year. United States: Up 48 per cent.
Interestingly, ad blocking is most popular on Google's own browser: 126 million active blocking users, measured monthly, at the end of second quarter 2015. Firefox: 48 million. Safari: 9 million.
On Android, Firefox is the big conduit for ad blocking: 16 per cent of users, or 40 per cent of all mobile ad blocking. PageFair claims that "Safari represents 52 per cent of the mobile browsing market (and 14 per cent of total web browsing). With support for ad block apps in iOS 9, we expect ad blocking on mobile Safari to trend towards the levels seen in the mobile version of Firefox".
Not So Fast
Mobile is the next thing for advertising. Safari is the leading mobile browser. By PageFair's reckoning, 16 per cent (or more) of users on iOS could actively block ads. That's bad for the digital advertising economy, right? Wrong. Mobile ad spending on apps will surpass browsers by a measure of 3-to-1 this year, according to eMarketer.
Driving the difference in spending: Consumer behavior. According to comScore, in the United States, for example, consumers ages 18-34 spend more time in apps (88.6 per cent) consuming digital media than browsers—60.7 per cent for those over 35. Apps also get more time in Canada and United Kingdom, too. More broadly, consumers from all three countries spend more time viewing content from smartphones or tablets than they do PCs.
Something else: In the Canada and United States, news and information accounts for just 3 per cent of time spent on mobile devices—5 percent in United Kingdom, comScore finds. In all three countries, social and entertainment, which are more likely consumed in apps, rank much higher. U.S. example: 29 per cent and 21 per cent respectively.
For broader perspective, I recommend IAB report "Apps and Mobile Web: Understanding the Two Sides of the Mobile Coin" and comScore's "Global Media Report".
Bottom line: The sky isn't falling—no matter what are Apple's ambitions against Google or what fear-mongering marauders say across the InterWebs about mobile ad blocking bankrupting publishers.
Editor's Note: A version of this story first appeared on Byline.