Tony Haile is making two big bets in 2018, and both of them are both shorts. The first is that average revenues per user for publishers won’t improve. The second is that digital advertising will remain unpleasant enough that people continue to try and avoid it. Those bets will have a big impact on how next year goes for Haile, when the founder and former CEO of Chartbeat unveils Scroll, a startup aiming to solve publishers’ problems with ad blocking and intense competition for ad revenue simultaneously, with a paid service that removes ads from users’ browsers. Haile discussed publishers’ challenges over the phone with us. The conversation has been edited and condensed for brevity.
2017 was a horror show for ad-supported digital media, and many publishers are trying to diversify away from it. Is the era of free, purely ad-supported content over?
The platforms, with their dominance of traffic, are going toward what I call a platform tipping point. At a certain point, so much of ad spend is concentrated with two players that actually the economic costs of maintaining the infrastructure to buy elsewhere becomes increasingly inexcusable for an advertiser. I don’t think you’re going to see ad-supported media disappear tomorrow. I do wonder whether we’re going to start seeing those premiums start to shrink and disappear over time.
Ad blocking loomed larger when you started thinking about Scroll in 2015. Why do you think ad blocking was a less urgent topic of conversation this year?
Ad-blocking rates have mostly stabilized, around 12-15 percent. Then, you look at sell-through rate. There’s relatively few publishers out there that are at 100 percent sell-through rate; for direct-sold, nowhere close. So while we can talk about the projected loss, in reality you haven’t seen publisher revenues affected by it too much. Ad blocking shouldn’t be seen as this Chicken Little problem to defeat. It’s a consumer signal: You have 236 million people saying they don’t want this experience anymore. That’s the shift in thinking from “Ad blocking is the end of the world!” to something that will stabilize.
Next year, browsers will start exerting more control over the ads that sites can display. Are you worried that the browsers will compete with Scroll, with the advantage of being free?
The challenge you tend to get is you’re not going to get publishers that say, “I was making a $30 CPM on this page, and now I’m making a $5 CPM, and I guess that’s just life.” Instead, you get a game of whack-a-mole. If they don’t get the autoplay video ad, I don’t expect publishers to just go, “I guess we’ll just run that one 300 x 250 banner.”
You wrote about the lousy job Facebook has done monetizing video for publishers. Is 2018 the year publishers start distancing themselves from Facebook?
I don’t think they’re going to start distancing from Facebook because it’s still way too powerful. What’s interesting is whether Facebook can make a go of its big bet, which is Watch. Facebook has had a tough time instantiating new behaviors on their platform, outside of news feed and Messenger. If you believe Watch is make-or-break, then they will continue to throw a tremendous amount of money at that for the next year or two. Publishers are going to be attracted to that like moths to flame.
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