THE STATE OF ADBLOCK: Back in 2012, AdBlock cost Google $887 million.
By 2015, this number rose to $6.6 billion.
And by 2020, AdBlock was causing publishers to lose $35 billion worth of ad revenue.
But it doesn’t seem like Google cares all that much.
In fact, the most popular AdBlock is offered through the Chrome Webstore itself with hundreds
of thousands of reviews and a total of 350 million downloads.
You would think that any reasonable business would have taken this down by now, or at least
taken steps to make AdBlock ineffective.
I mean, AdBlock surely has no chance against Google’s tens of thousands of engineers
right?
Well, the answer is yes and a perfect example of this is the YouTube app.
Due to the design of mobile apps, no AdBlock can block ads on the YouTube app itself.
But, there is a way around this on mobile devices.
Instead of using the YouTube app, you can use a mobile browser along with AdBlock.
So, while Google has added roadblocks along the way, they haven’t gone as far as completely
taking down AdBlock even though they could theoretically do it quite easily.
In fact, they have not only not taken steps to eliminate AdBlock, but Google has actually
been supporting AdBlock.
They’ve been paying AdBlock tens of millions every year to whitelist ads.
And this is how Adblock makes much of their revenue to remain operational.
Hearing this, you would probably think that Google has come to accept AdBlock as an unavoidable
loss in revenue similar to piracy within the media industry.
But, what if I told you that AdBlock is beneficial for Google.
It actually increases their click through rates, conversion rates, and even ad rates.
It also allows them to maintain their domineering monopoly within the browser space and the
search space.
And if you don’t believe me, just listen to this.
Back in 2017, Google was trying to build their own AdBlock that would be built into Chrome.
So, here’s Google has not only not taken down AdBlock, but why they pay AdBlock tens
of millions and support the overall effort.
UNSTOPPABLE MONOPOLY: First of all, Google isn’t stupid.
They’re not gonna support AdBlock if they think that it’s an net loss for the company.
The reality is that allowing AdBlock is more beneficial for Google than blocking it and
one of the main reasons for this is that it allows them to protect their monopoly.
Here’s the thing, Chrome is by far the most popular browser in the world with over 60%
marketshare across all devices.
But, if you look closer, you’ll see that Chrome is the only browser that’s backed
by an ad business.
Safari is backed by Apple who is mainly a hardware and services business.
They do have plans about entering the Ad space, but that has yet to happen in a substantial
manner.
As for Edge, well, Edge is backed by Microsoft who basically doesn’t even need consumer
based revenue anymore as they’ve transitioned to being an enterprise business.
And finally, as for the last notable player, we have Firefox who is a non profit who’s
actually staying afloat thanks to donations from Google.
If you’re wondering why in the world Google pays Firefox, be sure to check out our video
on that, but getting back to the browsers, Chrome is the only browser thats dependent
on ad based revenue.
This probably doesn’t sound like a big deal.
Google’s an ad business, and they make most of their money through ads, that’s not surprising.
And you’re right, that’s not surprising, but it does make them vulnerable.
Just think about, what happens if Google stopped allowing AdBlock on Chrome?
Well, AdBlock suddenly becomes a selling feature for everyone else, and given that none of
them need ad revenue, you can bet that they’ll sell the crap out of this.
Of course, they’re not gonna just publicly tell you that you should switch to Safari
because it has AdBlock.
That would probably be bad PR.
But, they’ll use more subtle avenues to make sure that you know.
They might make a public deal with AdBlock or feature the AdBlock app on the app store
or pay journalists to make a comparison between the browsers.
All of this would result in much of the 350 million users who currently have AdBlock to
consider or even switch to one of these other browsers.
But, by making AdBlock easily accessible on Chrome, Google is able to protect this massive
segment of the market.
AdBlock isn’t just effective at fending of large players either.
It’s also effective at fending of new up and coming players as well.
All of the browsers that we just discussed were created by established companies as an
afterthought and that’s why they don’t need ads.
If you were gonna create a browser based company though, it’s very likely that it would be
centered around ads.
And if you wanna have any chance at taking on Chrome, you too would have to allow AdBlock.
But, while that’s sustainable for Google with their nearly $300 billion in revenue,
it’s unlikely that it would be sustainable for you.
So, from Google’s perspective, allowing AdBlock does indeed mean sacrificing a lot
of revenue, but the alternative is sacrificing marketshare which is a lot more valuable.
AD PERFORMANCE: Aside from protecting marketshare, AdBlock
actually allows Google to have far better ad performance.
Here’s the thing, what type of person is gonna go out of their way to get the AdBlock
extension or use safari to watch YouTube instead of the YouTube app?
Well, the answer is someone who really doesn’t want to see ads.
Ironically, this is almost half of the internet as 42.7% of the world uses some form of AdBlock.
Now, Google could force ads on these people, but given their extreme distaste for ads,
they would be far less likely to convert which is not exactly a great thing for Google due
to how their ad business is structured.
In more traditional media like TV and movies, advertisers pay networks and studios based
visibility.
This is why it costs $7 million to air a 30 second commercial on the super bowl.
How well the ad performs is completely irrelevant for the broadcaster of the super bowl.
They get paid the same amount whether the ad gets a 1% conversion rate or a 50% conversion
rate.
In other words, the broadcaster doesn’t promise any sort of performance and likewise
their compensation isn’t based on performance.
Google also doesn’t promise advertisers any sort of performance, but here’s the
catch, Google only gets paid if the ad performs because they use a model called pay per click.
In this model, advertisers bid on how much money their willing pay per click and the
person with the highest bid will be displayed first on search results or YouTube or whatever.
So, theoretically, I could bid an insane amount like $1000 per click and Google could go ahead
and push that to a billion people.
But, if not a single person clicks, I wouldn’t have to pay Google a single dime.
Conversely, someone could bid a much more modest $1 per click and the ad could be pushed
to just 1 million people.
But if this campaign had a 10% click through rate, this advertiser would have to pay Google
$100,000.
As you can see, Google isn’t paid on visibility, they’re paid on results.
And so, even though Google doesn’t promise any sort of results, it’s in their best
interest that advertisers perform well.
And, one of the easiest ways to do this is the cut out the people who don’t want to
see ads.
These people would simply be inflating impression counts, deflating click through rates, and
putting off advertisers.
With that being said, I think the lost revenue estimates are actaully super inaccurate.
I’m not exactly sure how numbers like this are calculated, but they’re probably using
some sort of basic forecasting model.
If X number of viewers lead to this much ad revenue, Y number of viewers should lead to
this much ad revenue.
But, for this to be accurate, the ads would have to perform as well with Y number of viewers
as it did with X number of viewers which as we discussed in unlikely.
If the extra viewers were 10 times less likely to click, well then, the loss in revenue wouldn’t
be $35 billion, it would actually be $3.5 billion.
And who knows, by focusing on likely ad targets, Google may have been able to increase ad bids
to a point at which it offsets this cost.
So, AdBlock may not just a marketshare move for Google, it could straight up be more profitable.
CORE BUSINESS PROTECTED: So far, we’ve been discussing how Google
has been quite accommodating of AdBlock, but this is not 100% of the story.
You see, Google is only accommodating when we’re talking about revenue that’s auxiliary
or a bonus.
They’re not actually all that tolerant when it comes to their core business.
Take search ads for example.
Google didn’t waste a second when it came to striking a deal with AdBlock to white list
Google search ads.
The same thing can be said about any ad on any Google based platform.
AdBlock isn’t stopping inbuilt ads on Google Maps or Gmail or Google Flights or Google
Books or Google Shopping or even mobile YouTube.
Even if you found some AdBlock that accomplishes this, well, it’s not stopping Google from
continuing to collect data on you and trying to serve ads through other venues.
So, the bottomline is that Google isn’t actually ceding in any of their core businesses.
The part of the business that they’re ceding on is the ability to put ads on third party
websites, and even here they’re only losing out on the most obtrusive ads that aren’t
whitelisted.
If we zoom out, we’ll see that ceding here isn’t even a loss for Google, it’s actually
a gain because Google’s most valuable asset isn’t advertising, it’s attention.
Their number one goal is to consume as much of your attention as possible and prevent
you from going onto TikTok or Instagram or Twitter.
If you go search for an article and all of the ads on the article are blocked, that’s
not a big deal.
As long as you’re still researching, you’re gonna go back to Google, make more searches,
see more sponsored results, and visit more websites which may have whitelisted ads.
What would be a true loss for Google is if you visit a website, are bombarded by 10 ads,
and decide to go scroll through TikTok instead.
This is the main reason that Chrome itself has an inbuilt adblocker that’s automatically
enabled.
You may have not known this, but Google themselves block all ads on websites that they deem to
have a poor ad experiences.
This includes sites with too many ads, ads with flashing graphics and autoplaying audio,
and ad walls.
In many cases, these ads may be getting displayed through Google ads, so Google is technically
cutting off their own revenue in the short term.
But they’re betting this will lead to a greater user experience and stronger retention
which will theoretically be more profitable over the long term.
THE FUTURE OF ADBLOCK: In the end, Google has taken an extremely
sophisticated approach to AdBlock.
Given that they’re an ad business, it would’ve been easy for them to complain, throw a tantrum,
and try to eliminate all remnants of AdBlock.
But, instead they’ve looked to structure AdBlock in a way that benefits them.
They’ve used AdBlock to protect their market share and boost their ad performance.
Simultaneously they’ve also worked with AdBlock to whitelist ads on most of their
core services other than desktop YouTube.
The bottom line is that Google understands that eliminating AdBlock is not the solution.
The solution is to make ads less intrusive, less annoying, and more appealing.
The solution is to make the ad experience so good that people don’t even feel the
need to use AdBlock even if it’s available, and that’s really Google ultimate goal.
Or atleast, that’s the approach that Google has been taking so far.
With the recession and stagnating ad rates, Google may backtrack on this decision and
decide to crack down on AdBlock to please shareholders in the short term.
But, personally, I believe that would be a huge mistake.
Google got it right the first time.
Working through AdBlock is how Google can truly overcome AdBlock, not be just taking
it down.
And that’s why Google still allows AdBlock.
Do you use AdBlock?
Comment that down below.
Also, drop a like if you hope Google sticks to this approach.
And of course, consider checking out our discord community to suggest future video ideas and
consider subscribing to see more questions logically answered.