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Thursday, 8 October 2015

Adblocking on the rise

Adblocking became a real problem for advertisers last spring as the number of users installing such software rose to over 200 hundred million users across the planet (see article here). Early in the summer, I thought that this problem might matter for the long tail of content providers, largely sparing the big ad platforms (Google, Facebook, etc.). Not withstanding problems related to net neutrality, I thought that by and large the digital advertising market will remain the same as it is already concentrated in the hands of the large ad platforms.

Today, when infrastructure providers also consider adopting adbloking technology, it is clear that I couldn't have been more wrong. It is precisely the large ad platforms that might be hurt the most. Two particular events raise concerns. First, Digicel, a large mobile service operator decided to block ads on mobile phones. If other infrastucture providers follow a bitter negotiation can emerge, not unlike the one we saw emerging from time to time between cable operators and content providers (Comcast vs. Netflix or CBS vs. TWC). Such fights and the resulting settlements usually leave consumers worse off by introducing inefficieny in the market leading to high prices. The second event consists in Apple's large scale adoption of adblocking apps, some of which even block ads running within apps (e.g. Facebook's ads). Again, if a large platform like Apple blocks similarly large ad-based paltforms like Facebook and Google, then a lot of inefficiency can creep into the system.

There aren't only negative effects associated with these developments. The average quality of ads will rise partly due to the weeding out of really bad ads but also due to advertisers increased investment in ads that are relevant and impactful. Pages will load faster, a major concern for users that is driving in part the ad blocking trend. Still, adblocking may have just opened the next huge battle between large Internet platforms (just when we thought that patent wars might taper off as a result of a few reasonable settlements).

Tuesday, 29 September 2015

Contest between news providers

Here is a nice short video on the Associated Press' new website summarizing our conclusion on news industry competitive dynamics.

Monday, 31 August 2015

Google fights the EU

Google decided to put up a strong fight against the EU anti-competitive charges. See FT article here.
It will be an epic battle lasting years. Hopefully, it will not consume the company's energies the way a similar war has weakened Microsoft, that barely recovered from it if ever.

Friday, 21 August 2015

A busy summer

A lot happened in media this summer. First, the world has really woken up to the fact that streming is going to kick a real dent into the TV/Cable business. As a result many large media conglomerates owning TV or Cable assets saw a drop in their share price. Another interesting news is that News is back in vogue! Pearson has sold the FT to Nikkei for a nice price and The Economist has also been sold at a price comparable to that of Buzzfeed, the hot new media startup in which Comcast made an important investment. Who would have thought a couple of years ago that news (printed news) will still be alive in 2015? A lot happened on the new media/tech side as well. Google reorganized to become Alphabet to become more transparent about its diverse ventures. The bulk of the revenues still come from Google of course.... Facebook surged ahead of other social networks, LinkedIn and Twitter, in particular. It is becoming clear that the scale now matters more than what teens find sexy on social media. We will have an interesting Fall!

Wednesday, 10 June 2015

Blocking ads

Ad blocking can become a real problem for the media industry (see article from The Economist, see also this WSJ article). Ironically, I dont think it'll really affect the big advertisiers (Google, Facebook, etc.). These firms can negotiate with Adblock tech firms to pay a toll for their ads to pass. Similarly, they might be able to force consumers to look at ads: e.g. Google can deny service if adblock is installed - will people say, no I am not using Google? Not clear. On the other hand, what might happen to small sites living of advertising is not clear. In other words, Adblock might lead to an even more concentrated ad market. 

Friday, 5 June 2015

Credit Rating Agencies

Top Credit Rating Agencies (CRAs) have never done better. Their revenues and profits are up - way above levels seen before the crisis. This picture from The Economist shows that their market shares haven't moved a notch after the financial crisis when "aggressive" regulation was introduced to curb CRAs powerful influence on markets. What is ironic, is that this increased monopoly power largely originates from the very regulation that was supposed to introduce more competition in the sector, thereby - as was hoped - also providing more discipline in ratings. None of this happened. Why? The detailes can be read here. The bottom line is that regulation made it so hard to comply with the law that would-be competitors decided never to enter the market. Meanwhile the established agencies with established large market shares could easily amortize the additional fixed costs of compliance. A classic case of bad regulation.....

Tuesday, 12 May 2015

Publishers on Facebook

Facebook has pretty much managed to convince publishers to put their content on its powerful platform. The value proposition is simple: Facebook knows how to sell mobile ads against that content as opposed to helpless publishers whose current revenues from mobile ads are very small. Publishers can keep 70% of the ad revenues sold by the Facebook (they can keep 100% of ad revenues they generate). For publishers, this is a substantial revenue potential, while they have no real alternative. Facebook's mobile display ad revenue share is 35%, by far the largest and still growing fast. Moreover, an overwhelming proportion of the traffic to publishers' sites already comes from Facebook (see WSJ chart), which is mostly accessed by via smartphones. If this trend holds up - as it seems to - publishers have no choice but to upload (some) of their content on Facebook.