For a very long time, advertising has financially supported free content on the internet. Subsidizing free content with ads predates the internet as a similar model was used on mediums like television, radio, newspapers, and magazines.

Internet users have control over their browsers and millions of them have opted to block ads completely from their browsing experience. User reasoning for ad blocking ranges from privacy concerns, convenience reasons, or page loading speeds experienced while browsing.

A 2017 report says there are 615 million devices with ad blocking software installed. The growth in devices with ad block installs is up by 30% year over year which is a sharp increase. 62% of the installs are on mobile devices which may be attributed to emerging markets where limiting bandwith usage on mobile devices is important to users.

The 2016 estimate for lost revenue due to ad blocking is up to $41.4 billion, which is almost double the value of the 2015 estimate of $21.8 billion. Lost revenue is one dimension and lost equity value is another dimension. An examination of the relationship between top line ad revenue and equity value of a company gives an average 6x multiple on the top line revenue to equity value. This multiple would imply a $248.4 billion loss of equity value when considering the estimated $41.4 billion loss of global ad revenue.

Cost of ad blocking worldwide from 2013-2016 via Statista

Cost of Ad Blocking Worldwide from 2013-2016 via Statista.

Indeed, the extrapolation is back-of-the-envelope math especially considering a significant amount of ad blocking is happening in emerging markets where CPM’s may be lower than developed markets. Regardless, the numbers are incredibly large. Industry publications say ad blocking is an existential threat. In other words, too much ad blocking can cause severe losses for publishers who need ad revenue to survive.

Our thesis for entering the market is users should be able to share in the value being created in the ad economy. The two largest digital ad companies, Google and Facebook, have amassed a combined market capitalization of over $1 trillion. These tech titans use data from their users and generate tremendous value through advertising. Users could share in that value because it is their data and they have control over their browsers ability to display an ad.

The majority of ad block users are learning about the software through friends, colleagues, and family members. Referrals are driving the steep increase in installs of ad blocking products. The release of our own referral system is reflective of that trend.

How users are finding out about ad blocking software via PageFair

How users are finding out about ad blocking software via PageFair’s Adblock Report.

The long term impact of our ad blocking Extension on the XCLR ecosystem is yet to be realized and we continue to lay the groundwork.

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