Google Rumoured To Plan A Built-In Ad Blocker In Chrome

The Wall Street Journal reported yesterday that Google may be planning to introduce an ad blocking feature to its Chrome browser on desktop and mobile. The article clarifies that this is not a confirmed move yet – it may or may not go ahead in the upcoming weeks. However, there are a number of reasons for Alphabet’s Google to pursue building an in-house ad blocker, despite being heavily dependent on digital ad revenue.

Reasons

Revenue: A key reason for Google to deploy a built-in ad blocker is to slow revenue leakage created by the rise of ad blockers. Google has been known to pay large sums to Eyeo’s Adblock Plus for its ads to go through. Firstly, a built-in ad blocker will help slow the increase of this sum (However, it will not necessarily make it smaller). Even more importantly however, if Google’s ad blocker scales, it may be technically able to ‘pull an Eyeo’ itself and lock out all ad networks except its own from reaching Chrome users - who represent nearly half of all browsing traffic globally.Browser Competition: By now, most major browsers have embraced ad blocking and provide users either with their own built-in versions (e.g. Opera or UC Browser) or allow mobile extensions for consumers to install third party ad blocking add-ons (e.g. Firefox or Safari). While Chrome allows extensions on desktop, it does not do so on mobile. The more browsers that offer ad blocking capabilities, the more consumers will come to expect such functionality as a standard in browsers. This puts more pressure on Google to build one too, to avoid falling behind functionality-wise in the eyes of consumers.Insight: Ad supported companies (including Facebook) struggle to understand ad blocking users due to difficulties associated with tracking them. Deploying an in-house ad blocker would improve Google’s knowledge of this high-value consumer segment, which would facilitate better targeting and consequently create a more appealing offering to advertisers.Wildcard – making the price right for a potential acquisition: We have long concluded that Alphabet could and should acquire Eyeo. Despite the negative PR storm this would cause for obvious reasons, the tangible benefits for Google would make up for an impressive list– a new revenue stream, improved consumer insight, a stronger grip on the digital advertising industry and ad standards as well as a better competitive position against Facebook, to name just a few. If a potential future acquisition is indeed being pondered at Alphabet, then deploying a competing solution first can serve to lessen Google’s dependency on Eyeo and therefore, drive its potential acquisition price down. The less desperate Google looks when (if ever) entering such discussions, the better deal it will be able to negotiate.

Will it work?

It is highly unlikely that existing ad blocking consumers will start switching over to Google’s solution. Rather, the company has a chance to deter ad blocking newbies to look for a third party solution when they start thinking of using an ad blocker. Thus, Google is unlikely to make a significant dent in the sum it already pays to Eyeo in the short term. If successfully deployed however, it could decrease the speed at which this sum will increase every year.

The key question mark around the success of Google’s built-in ad blocking solution lies in how it will handle YouTube ads. Many consumers started using ad blockers to eliminate Youtube ads. Google must therefore be careful balancing between the risk of revenue self-cannibalization and offering an incomplete ad blocking solution.