Is Apple trying to slowly kill Google? And what ad-blockers have to do with it?
Is Apple trying to slowly kill Google? Since they are fierce rival this scenario does make sense, but how would ad-blockers play a part in that strategy?
Let’s take a step back.
Google in 2014 announced total revenues of $66 billion (Investor.google.com, 2015). Can you guess what portion of the $66 billion comes from advertisement? Whatever you guessed is probably wrong, because the vast majority of Google’s revenues, $59 billion in fact, comes from advertisement. Specifically in 2014 68.3 percent of Google’s revenue came from advertising through Google sites and 21.2 percent through advertising via Google network sites.
If we focus even further we can observe that for 2014 Google had roughly $12 billion ($11.8 billion) in mobile search revenue, almost 20 percent of its total revenues. Of that $12 billion roughly $8.8 billion was attributed to iOS devices. Taking into account that half of the search volume for Google comes from mobile devices, we can infer that in the future that percentage Google makes from mobile devices is only going to grow (Sterling, 2015).
Distribution of Google’s revenues from 2001 to 2014, by source
A permanent threat of Google’s revenue is ad-blockers. Ad blockers are separate programs or add-ons for browsers that remove or filter advertising content in a webpage, or an application. There are ad-blockers available for all operating systems (Windows, Linux, OSX), mobile platforms (Android, iOS, Windows) and browsers including Firefox, Chrome and recently Safari. The obvious benefits of using an ad-blocking tool for the user is the faster, lighter (in terms of data) and cleaner portrayal of websites and also a frustrating-free navigation experience without annoying pop-ups or videos loading without your permission. Another important benefit of using ad-blocking software is the increased privacy since ad platforms cannot track your personal data. Furthermore security issues can be a reason of using ad-blockers, since dangerous malware is sometimes hidden in advertisements (Navaraj, 2014).
Despite the obvious benefits mentioned above, ad-blockers are a threat to content providers (such as websites, publishers and video producers), which depend on advertising as their main source of income either every time ad is shown to a visitor, or every time an ad is clicked, but also to advertising providers such as Google, which depend on users viewing or clicking their ads on behalf of their advertisers.
There is a growing trend in the use of ad-blocking software. Globally the number of active users surfing the web behind an ad-blocking software in 2009 was 21 million, but has quickly grown to 121 million in 2014.
In 2015 the adoption rate of ad blockers globally increased by 41% in 2014 amounting to 200 million users and is expected to grow even more (Blog.pagefair.com, 2015). So in the last 6 years the users of ad-blockers has been multiplied tenfold. The amount of lost revenue due to ad-blockers is beyond imagination. It is estimated to be $41.4 billion by 2016. That has dare consequences for publishers and content providers in general as well as provider of ads, mainly Google.
You might wonder ok, what does Apple has to do with Google’s revenue model, the wide spread of ad-blockers and how does that involve Apple trying to kill Google?
Well recently Apple introduced a feature on its mobile devices which allowed the installation of ad blockers.
Can you see it now?
Apple is indirectly attacking Google’s revenue model (which is based on advertisement) by enabling iOS users to filter and block all advertisement from Google. That is a war and has huge consequences for Google and publishers that depend on revenues from ads on their websites that now can be avoided.
The question now is how Google is going to respond and how publisher are going to survive without their main source of revenue.
Student number: 401028
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Investor.google.com, (2015). 2014 Financial Tables – Investor Relations – Google. [online] Available at: https://investor.google.com/financial/2014/tables.html [Accessed 12 Oct. 2015].
Investor.google.com, (2015). Google Inc. Announces Second Quarter 2015 Results – Investor Relations – Google. [online] Available at: https://investor.google.com/earnings/2015/Q2_google_earnings.html [Accessed 12 Oct. 2015].
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Patel, N. (2015). Welcome to hell: Apple vs. Google vs. Facebook and the slow death of the web. [online] The Verge. Available at: http://www.theverge.com/2015/9/17/9338963/welcome-to-hell-apple-vs-google-vs-facebook-and-the-slow-death-of-the-web [Accessed 12 Oct. 2015].
Sterling, G. (2015). Report: Google Had $12 Billion In Mobile Search Revenue, 75 Percent From iOS. [online] Marketing Land. Available at: http://marketingland.com/report-google-had-12-billion-in-mobile-search-revenue-75-percent-from-ios-130248 [Accessed 12 Oct. 2015].