What do companies do when their primary revenue stream, advertising, is interrupted by users' desire to use adblocking software?
Are we unintentionally bringing about the end of a free internet and if we are, what other revenue streams are likely to replace traditional ads?
These were the questions I had sitting in a post at the top of my drafts for the last four days after watching a lecture by Scott Galloway, a professor of marketing and founder of L2.
Last week's Redcode Media podcast featured Joe Marchese, who became Fox Network Group's (FMG) President of Advanced Advertising Products after FMG purchased his "engagement advertising" company in 2014. Known for making provocative statements about the future of the industry, Marchese was invited onto the podcast to provide further insight on his unusual views regarding the use of adblocking software and the disruption it creates in his industry.
Marchese surprised the host of the podcast, Peter Kafka, by repeatedly playing devil's advocate and arguing for both sides. As president of FMG, the umbrella that houses 20th Century Fox, he's cognizant of the fact that their business model does not live or die by the consumption of advertisements. The majority of their profit is through the production and airing of television shows and movies, unlike Google and Facebook where more than 90% of their revenue comes from ads. He can tell when consumers are using ad block software and decide whether or not he wants to give them access to the content but if Google or Facebook asked people whether or not they wanted to view ads, they would see an immediate decline in their profits. Some content providers make it so that an ad has to be watched at least partially before the show begins, while others allow it to be skipped entirely. While the most controlling companies believe that if they're not gaining revenue from the consumer, the consumer should have no access to the content they came to see - telling them unless Adblock is disabled they will be unable to see the content. FMG can and has done that in the past, with episodes of Family Guy being unable to watch unless you whitelisted them in your Adblock settings.
Maybe Marchese's view is this way because the eradication of ads would not heavily affect his company's income, but Marchese feels that consumers should be given the decision. Pay for the content with their time by being forced to watch the advertisement or, come to an agreement on how else to pay for their entertainment. He believes for the future of advertising to work producers and consumers are going to have to work together to figure it out. Some companies are already turning to subscriptions. Hulu is trying something new by offering an ad-free experience alongside their regularly priced subscription plan. For $12 viewers can choose whether or not they want to see ads on their shows. That leaves it up to the customer to decide whether an ad free experience is worth $4 extra to them or not. (And at the time of this posting, the majority of viewers have decided that on Hulu an ad free experience is not worth their $4 and have stuck with the standard $8 plan.) In this case, viewers would rather pay with their time than their money.
This is only my first semester as a public relations / marketing student, so I will not even begin to make predictions, but I think Marchese is correct when he says that advertising has to become a compromise. People will avoid websites entirely if they can find their content ad-free somewhere else and companies will have to decide how important those viewers are to them. The question is, what are some of the alternatives? Should we resort to the old tried and true method of quiet product placement? An Apple computer in the corner of an office sitcom? Staffers on Scandal using Windows Surface Tablets as they walk through the halls instead of brandless tablets or laptops? Maybe Coke will have their products placed in your favorite VR game or layered over your coffee table in AR.
What are some of the options you think are available and how readily do you think companies will adjust to this changing field? Which companies will fall behind and which one will realize that consumers are no longer paying attention and decide to pivot to a new marketing device?
A lot of pontificating but I will do a rewrite once I learn more about this transforming / "transformative" industry.
tldr; Fox Network Group's new president of advertising believes companies and content producers will have to work with customers and consumers to decide how, if not through advertising, the content they ingest will be paid for.
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