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How Apple’s Ad-Blocking Strategy May Ultimately Benefit Google

Original Article: https://mindyourdecisions.com/blog/2015/07/07/heres-why-apples-ad-blocking-strategy-may-ultimately-benefit-google-game-theory-tuesdays/

 

As information continues to explode in the digital world, low-quality advertisement like auto-playing videos and banners are constantly deployed to generate greater revenues. In turn, the need to set up a wall between the users and advertisers seems to have grown. Ad-blocking softwares hence gained popularity over the years (a chart of Ad-blocking growth). While they indeed improve user experience, many worry that they cut down revenues from advertising, and thus make it more difficult for independent websites to survive. However, as argued by a blog post from Presh Talwalkar, who is the author of many a books on game theory, ad-blocking actually has a good influence on the internet advertising market.

According to the article, only five to ten percent of users ever click on ads; moreover, sometimes paid search ads do not even generate extra traffic. This is largely because of the deterioration in the quality of ads, such as pop-ups, which is interestingly similar with how TV advertisers used to increase the volume to attract attention. In conclusion, the point lies not in the fact that people are using ad-blocking softwares, but that there has already been a need for advertisement quality to improve. Ad-blocking is simply a response to this trend and a trigger for it to change.

The author provided some tips in “best responding” to the increasing use of ad-blocking softwares. For example, ads should find ways to be more entertaining: just look at how people talk about Google’s homepage Doodles. Exclusive offers would also attract people’s attention without being annoying. Furthermore, there are other forms of advertising: for instance, using Google Survey to allow for readers to access premium articles, or giving a cut of the sales to the content provider, which are all exciting opportunities. The author concluded by suggesting that the very act of Apple’s supporting ad-blocking will “spur even more innovation for more creative forms of advertising that will benefit Google and other ad networks in the long run.”

This article serves as a real-world extension of the concept of advertising markets that we covered in class. Moreover, it is based on the idea of game theory, that an action of one party (users using ad-blocking softwares) in an interaction will not cause simple changes to the result (decrease in revenues), but influence other parties (advertisers and content providers) to develop new strategies which may affect the result in the other way (users experiencing ads with higher quality and advertisers gaining more revenue). With the knowledge of game theory, we can better improve the internet environment so that all sides can benefit from it.

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