For the first time in U.S. advertising history, the revenue generated by Internet advertising surpassed that of broadcast media, such as cable TV and radio. According to a report by Interactive Advertising Bureau, advertisements on the Internet raised $42.8 billion for the industry compared to the advertisements made on broadcast TV fetching $40.1 billion.
The advertising industry has probably been the richest beneficiary of technological evolution from broadcast cable to the Internet. From YouTube advertisements — small video clips that appear before YouTube videos, to small widgets that adorn news websites, the online advertising industry has kept pace with the latest developments in the web technology, often biasing software policies for browsers. So much so that when Mozilla refused to allow third-party cookies — small pieces of software that allow advertising agencies to learn user behavior — to live inside the Firefox browser, it became the top adversary for the industry.
A lot of Internet companies depend on the advertising industry to generate revenue. Google’s Adwords software comprises majority of Google’s revenue. When users use Google to search for certain keywords related to a client’s business, Google shows the client’s ads on the top right corner and above the search results. Similarly, Facebook has its clients’ ads put on the top right corner of each user’s Facebook page. Users who are logged in will get ads relevant to the personal information that they have shared with Facebook. Mozilla, too, recently announced that even if it does not allow third-party cookies, which allow it to target intelligent ads at users, the company will allow a small number of ads to come up on the tiles page of its Firefox browser — a move that irked majority of the Mozilla community.
There is a growing dissent for Internet ads that interrupt service usage. Facebook ads not only eat up space but irrelevance of the advertisements to a user is an important question. Youtube’s advertisement clips before each video has caused a spur of browser add-ons and proxy websites that deliver YouTube videos without the ads. Ad-block and other anti-advertisement add-ons are now among the most downloaded browser add-ons.
Even as the increasing ads cause frustration for Internet users, questions rise whether decreasing the number of ads is a plausible solution when ads comprise of such a major component of Internet giants. Companies such as Google and Facebook can afford to give free services for end users because they are able to generate revenue from advertisements. Even as the Internet becomes an integral part of our lives and a battle ensues to keep it free, it comes at the cost of advertisements.
With the rise of the smartphone industry and the Internet giants shifting their emphasis to the mobile usage, mobile advertisements have added to the Internet advertising impetus. Mobile ads revenue doubled to $7.1 billion this year from $3.4 billion in 2013.
An alternate model of revenue is that which Microsoft-like companies follow. Its revenue does not stem from online advertisements but from the software it makes. But that leads to the software source code to be closed. This has led to Microsoft gaining a bad image among the software development community for actively blocking open-source software development.
Yet another example came from WhatsApp. It followed a no-ads policy and yet it was able to create a service that fetched the company more than 450 million users.
As they say, there is no free lunch. Apparently, it stands true for revolutionary technologies, too.
Send your thoughts to Naman at technician-viewpoint@ncsu.edu.
