Adblocking has become somewhat of a sensitive topic over the past few years for both online advertisers and publishers. It arguably represents one of the most significant challenges for both the advertising industry and the way in which online content is funded. Opinions surrounding adblocking can be polarised. Given the volume of conflicting commentary on the issue, it can also be challenging for legal counsel to distil the legal issues. This article therefore acts as an introduction to adblocking for legal counsel who are relatively new to the issue.

Adblockers generally take the form of a browser plug-in downloaded by the end user. The adblocker typically works by preventing the display of advertising originating from domains on the adblocker’s ‘blacklist’. As part of the process of loading content from a publisher’s website, a user’s browser may be instructed to “call” third party display advertising from an ad server which, when loaded will appear adjacent to the editorial. With an adblocker running in the browser, only the editorial content from the publisher will be displayed, and the third party display advertising will be, as the name suggests, “blocked” and won’t appear visible on the webpage.

Other forms of adblockers work in similar ways, for example ISP-level adblockers, if implemented, block the ads as the level of the internet service provider (as opposed to at the browser level) and prevent online display ads from ever reaching a user’s home network.

Why is adblocking an issue?

The obvious challenge presented by adblockers is that they affect the revenue online publishers earn from display advertising. There are lots of different commercial models for the sale of online advertising, for example, publishers may be remunerated on a “CPM” basis where they earn revenue based on the number of impressions (essentially a “view”) of the ads served on the webpage, or on a “CPC” basis, where the publisher’s revenue is calculated in accordance with the number of “clicks” on the ad. Whatever the basis on which ads are sold on, if a user is running an adblocker which prevents the ads from being displayed in the first place, the publisher’s ability to earn money from display ads on its site will be hindered.

The reason why adblockers have become such a hot topic in the industry is because of the sheer volume of take-up. Some reports have suggested that, over the past two years, the proportion of desktop internet users in the UK running adblockers has doubled to almost 25%. There are various analyses which seek to account for this significant growth. For example, some sections of the industry cite “advertising fatigue” caused by the large volume of ads being displayed to users as driving the uptake of adblockers. Likewise, a report by the International News Media Association suggested that delivering “low volume, respectful ads” could be an effective way of reducing consumer annoyance with online ads and thereby reduce the prevalence of adblockers.

Other reports have cited the disruption caused to the user experience by display ads as a significant factor. Furthermore, in the ‘post-Snowden’ era, there is an argument that growing consumer concerns about privacy have fuelled the growth of adblockers as users feel uncomfortable by techniques such as online retargeting where an ad for a product a user may have viewed online seems to follow the user around the web.

What has the industry done about it?

To combat the threat posed by adblockers, publishers have tested various solutions. For example, some publishers have implemented pop-up messages attempting to persuade users to disable their adblocker when visiting the site. Others however have adopted more aggressive measures. Channel 4, for example, refuses access to any video content while an adblocker is enabled. Facebook has also recently implemented measures to bypass adblocking software altogether. Interestingly, Facebook’s Q3 earnings showed an 18% increase in desktop advertising revenue year-on-year, around half of which Facebook CFO David Wehner publicly attributed to its combatting of adblockers.

Requiring consumers to pay for content directly, for example by implementing a paywall or the option of an ad-free subscription model, is another means by which publishers have sought to bolster falling ad revenues. However, there is a view that the “value exchange” implicit in the provision of content funded by advertising has historically either been unappreciated (or ignored altogether) by consumers. As a result many publishers have found it challenging to get their user base to pay for content ad-free which those users have otherwise thought of as free.

Aside from online publishers, many major advertisers have started to become vocal about the need for change. Brad Jakeman, the president of PepsiCo’s Global Beverage Group has described adblocking as a “wake-up call” that consumers are unhappy with traditional advertising methods. This is causing advertisers to seek alternative means of promoting their brands outside of traditional display advertising. For example, the proliferation of adblockers may be a contributing factor to the use of innovative ad formats such as “native” advertising or branded content which is not so easily blocked by adblockers. Likewise, major brands such as Unilever and L’Oreal are increasingly doing deals with high profile “vloggers” under which these YouTube stars are paid to produce videos in which they speak positively about the brand.

What are the legal issues?

Some of the commercial models operated by the adblockers themselves have proved controversial and have even led to litigation. In particular, certain adblocking software providers operate a “whitelist” whereby publishers can pay to ensure their domains are whitelisted and the ads on their site are not blocked.

Similarly one of the most popular adblocking software providers, Adblock Plus, operates a whitelist which it markets under the banner “Acceptable Ads”. Adblock Plus allows end users to opt in to receiving pre-approved ads which meet certain criteria based around size and placement. If participating in Acceptable Ads generates an additional 10 million CPMs per month for a publisher, Adblock Plus takes a 30% share of that publisher’s revenue. According to Adblock Plus, this affects approximately 10% of Acceptable Ads participants.

The practice of whitelisting led John Whittingdale MP, then Secretary of State for Culture Media and Sport, to describe adblockers as “akin to a modern-day protection racket”, adding that “if people don’t pay in some way for content, then that content will eventually no longer exist.”

This therefore raises the question as to whether adblockers are legal? There is, at the time of writing, limited or no guidance from the UK courts on the position regarding adblockers. However, there has been some litigation in Germany. Eyeo GmbH, the company which operates Adblock Plus, has been subject to a series of actions in Germany where publishers have challenged the use of Adblock Plus to block adverts on their domains. Amongst other grounds, claims have been made upon the basis that: (i) whitelisting is anti-competitive and/or an abuse of dominance; (ii) the media has a constitutional right to advertise; and (iii) a publisher’s core business is advertising and the journalistic content is just a vehicle for that advertising.

To date Eyeo has successfully defended all such claims except one, where an interpretation of German competition law (which is itself a “gold-plating” of existing EU law) was held by the Cologne Higher Regional Court to mean that Adblock Plus could not charge the German media giant Axel Springer to be whitelisted, though it did not establish a general rule preventing charging for whitelisting. At the time of writing, the judgment is currently under appeal to the German Supreme Court.

In the UK, whilst the government is aware of the challenge posed by adblockers to the online content industries, the practice of adblocking remains unregulated. There may however be a broader legal barrier to the provision of ISP-level adblocking services within the European Union as a result of “net neutrality” regulations implemented in 2015. In particular, Article 3(3) of EU Regulation 2015/2120 requires that “providers of internet access services shall treat all traffic equally, when providing internet access services, without discrimination, restriction, or interference, and irrespective of the sender and receiver [and] the content accessed or distributed …”. Guidance from The Body of European Regulators for Electronic Communications (“Berec”) states that, ISP-level adblocking would be a breach of these net neutrality regulations. This issue being that, whether content happens to be advertising sent by an ad server or editorial sent by the news media should be immaterial. The point of net neutrality is that ISPs must treat all such content equally (subject to certain exceptions in the regulations around reasonable “traffic management”). As things stand, then, an ISP would be taking a considerable risk by implementing an ISP-level adblocker as it could find itself in breach of EU regulations.

Writing online advertising’s obituary would of course be premature. However, the increasing prevalence of adblockers, and the currently limited tools available to publishers to directly combat them, is certainly an invitation to the advertising industry to innovate. Whether the challenge posed by adblockers will lead to more litigation and/or regulation, remains to be seen.