Alok Goel
Alok Goel
Oct 13, 2017 · 3 min read

If consumers hate those ugly banner ads so much, why do they still exist?

Well, those banner ads provided a way for the content creators to make money. To put simply, content providers gave only two options to consumers– either consume content with ads or don’t consume content at all. Historically, ads were not that much of an inconvenience on a large computer screen. We had enough space for content and ads. And over time, we built blindness towards these ads.

But in the mobile-dominated world, things aren’t the same. Smaller screen size makes every single pixel valuable. Wastage of those pixels by advertisements results in deterioration of content consumption experience.

So the natural question is- Will content/banner ads exist in the near future? My answer is, “No, they won’t”.

Why? Because in addition to consumers, the ISPs (Internet Service Provider which happen to be the 3G/4G providers in the mobile world) hate ads more than anyone in the ecosystem. How can ISP accept the fact that someone is making money on data while they are just being treated as dump pipe? And, ads account for about 25–40 percent of bandwidth. This is a mind-boggling number for ISPs, who are struggling to maintain a necessary quality of service for the 4G in an environment that has an ever-expanding need for bandwidth. Imagine a network being able to increase its bandwidth by 25 percent without paying a rupee to the government. Sounds super attractive, isn’t it?

So these ISP have huge incentive to start blocking the ads and collude with consumers. I think, soon telecom data providers will start blocking ads by encouraging users to sign up into “DND” (“Do Not Distract”) list. They will position this tool to customers to have an enhanced experience and naturally users will happily signup.

Even without any tool from ISP, other ad-blocking tools are growing. For instance, Mary Meeker’s latest report on Internet trends says that 28 percent Indians have an ad blocker on mobile and globally 400M users use ad-blocking technology. I think companies like Reliance or Airtel will initiate the final nail in the coffin in not so distant future.

Now if ads were to disappear, how will content creators/providers make money? One can argue that creators/providers will not serve content to consumers on DND list. I don’t think this a realistic possibility. Such scenario will be a classic case of prisoner’s dilemma and no content provider will afford a loss of massive consumer base. As the reduction in reach will compromise their ability to ask for the share of ad dollars. After all, content providers will get ads dollar share by showcasing massive consumer reach.

So how would content be monetized?

The only form of advertising that can’t be blocked by ISP is when the ad is an integral part of the content, or the content itself is promotional. Hence, “Native Advertising” and “Content Marketing” will be the only two forms of advertising models to survive. No ISP will be able to block such ads. This will also be good for the consumer because they will engage with these ads only when they find it interesting.

In fact, some of the legacy media brands including Forbes, Atlantic Media and the Washington Post have already joined the native ads bandwagon. Forbes even became the poster child of sort, thanks to their Native Advertising concept, BrandVoice.

So if you are in content business, watch out! Be prepared for this disruption?

SAIF Partners

SAIF Partners is a venture and growth capital fund invested in helping Asia's exceptional companies grow from concept to IPO.

Alok Goel

Written by

Alok Goel

Alok has been with SAIF Partners since 2015, and is leading investments in Mobile and SAAS/Enterprise segments.

SAIF Partners

SAIF Partners is a venture and growth capital fund invested in helping Asia's exceptional companies grow from concept to IPO.

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