Facebook’s Ad Revenue Could Surge Overnight as it Disables Users’ Ad Blockers

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August 9, 2016 11:41am Nasdaq:FB

facebook-fb-logoIf you’re using ad blocking software, then your Facebook Inc (NASDAQ:FB) feed could soon soon quite a bit different than you’re used to.

That’s because the company will flip a switch sometime today that changes how its ads are displayed, rendering ad blocking software obsolete on its desktop platform. From the New York Times:

“Disruptive ads are an industry problem, and the rise of ad blockers is a strong signal that people just don’t want to see them,” Andrew Bosworth, vice president of Facebook’s ads and business platform, said in an interview. “But ad blockers are a really bad solution to that.”

Facebook’s move is set to add to a furious debate about the ethics of ad blocking. On one hand, many digital ads are a nuisance — they slow loading times of web pages and detract from the online experience. Yet the ads also serve as the business foundation for many digital publishers to provide content to readers.

Ad blockers have become a threat to publishers including The New York Times and The Wall Street Journal, which are facing declining advertising revenue. About 200 million people worldwide use ad-blocking software on their desktop computers, according to estimates from PageFair, an anti-ad-blocking start-up. An additional 420 million use ad blockers on their smartphones, the company said.

In contrast to NYT and WSJ, however, Facebook has seen its own ad revenues surge in recent years. The company has continued to carve out a larger and larger share of the total online ad market. Those sales stand to benefit greatly from this ad blocker blockage.

Let’s assume these 200 million people that currently use ad blockers are all Facebook users (probably a very safe assumption). If FB can derive an extra $1 per quarter for each of these users that now will be viewing ads, that’s an extra $200 million per quarter. That gain would equate to a 20% rise over its current ~$1 billion quarterly in desktop ad revenue.

If you’re bummed about ads returning to your feed, Facebook is throwing you a small bone:

On Tuesday, the company is also rolling out an overhauled version of its ad preferences tool, which allows people to opt out of seeing certain types of ads on the site. That will help Facebook serve more relevant ads, rather than bombard people with ads they do not want.

The bad news for users is that they’ll probably see more ads. The good news is the ads will be more relevant to their interests.

And that’s all good news for Facebook.

Facebook shares rose $0.57 (+0.46%) to $125.83 in Tuesday morning trading. FB has gained more than 20% year-to-date, compared with a 7% rise in the benchmark S&P 500 during the same period.


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