Mobile operators plan to block online advertising

Several mobile operators plan to block advertising on their networks, setting the stage for a battle with digital media companies such as Google, AOL and Yahoo.

One European wireless carrier told the Financial Times that it has installed blocking software in its data centres and planned to turn it on before the end of 2015.

The software prevents most types of advertising from loading in web pages and apps, though it does not interfere with "in-feed" ads of the kind used by Facebook and Twitter.

The blocking technology was developed by Shine, an Israeli start-up whose shareholders include Horizon Ventures, the investment fund of Li Ka-shing, Asia's richest person.

Justin Sullivan | Getty Images

Mr Li also controls Hutchison Whampoa, one of the world's largest telecoms groups.

"Tens of millions of mobile subscribers around the world will be opting in to ad blocking by the end of the year," said Roi Carthy, chief marketing officer of Shine. "If this scales, it could have a devastating impact on the online advertising industry."

Verizon, the largest US telecoms group, this week paid $4.4bn to buy AOL, seeking to gain a foothold in the rapidly growing market for advertising on mobile devices.

Marketers will spend almost $69 billion this year on mobile ads — more than triple the sum they spent two years ago — according to research group eMarketer.

Shine said it was working with a number of operators, including one with almost 40 million subscribers, though it declined to name them.

An executive at a European carrier confirmed that it and several of its peers are planning to start blocking adverts this year.

The executive said that the carrier will initially launch an advertising-free service for customers on an opt-in basis.

But it is also considering a more radical idea that it calls "the bomb", which would apply across its entire network of millions of subscribers at once. The idea is to specifically target Google, blocking advertising on its websites in an attempt to force the company into giving up a cut of its revenues.

The Silicon Valley company is the world's largest advertising business, generating $60 billion a year from search, YouTube, and services such as Google Display Network and DoubleClick, which both deliver ads for third-party sites.

The executive at the mobile operator considering "the bomb" acknowledged that targeting Google could be risky from both a legal and public relations perspective. Under "net neutrality" rules in the European Union and the US, telecoms companies are forced to treat all data that flow through their networks equally.

But even within those markets, it would be feasible to block adverts on Google "just for an hour or a day" to bring the company to the negotiating table, the executive said.

More from the Financial Times:
Online arms race heats up over adverts
Screens collide in clash over advertising
Verizon looks to AOL for mobile ads edge

Many mobile operators are frustrated that digital media companies profit from their high-speed networks without having to invest in the infrastructure behind them. Such irritation was inflamed last month when Google launched Project Fi, its own wireless carrier in the US.

Google said it would be unreasonable for mobile operators to block ads, arguing that: "People pay for mobile internet packages so they can access the apps, video streaming, webmail and other services they love, many of which are funded by ads. Google and other web companies invest heavily in developing these services — and in the behind-the-scenes infrastructure to deliver them."

Blocking advertising on mobile networks is likely to provoke a fierce backlash from digital media companies. In 2013, Free, the French internet service provider owned by Iliad, blocked ads by default through its Freebox modem, causing huge controversy. It was forced to scrap the initiative within a week under pressure from the Socialist government.

Mr Carthy of Shine said that eliminating intrusive adverts is a "consumer right", even if it undermines the business model of online publishers that rely on advertising.

"Online advertising is out of control and it's polluting the user experience," he said. Pop-ups, auto-playing videos and other forms of digital advertising can consume between 10 and 50 per cent of a mobile subscriber's data plan, he added.

While ad-blocking is a new phenomenon on mobiles, it is more established on PCs and growing quickly. More than 140m people, or 5 per cent of the online population, use software such as Adblock Plus to eliminate adverts when browsing the web on laptops or desktop computers.

As the Financial Times reported in February, Google, Microsoft and Amazon have paid the makers of Adblock Plus to allow some ads on their sites to slip through its filters.

Google's relationship with ad-blocking is further complicated by the fact that such software is the most popular type of free add-on to Chrome, its popular web browser.