The Beneficial Effects of Ad Blockers

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review

5 Scopus Citations
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Detail(s)

Original languageEnglish
Pages (from-to)2096-2125
Number of pages31
Journal / PublicationManagement Science
Volume67
Issue number4
Online published23 Jun 2020
Publication statusPublished - Apr 2021

Abstract

Although online advertising is the lifeline of many internet content platforms, the usage of ad blockers has surged in recent years, presenting a challenge to platforms dependent on ad revenue. Using a simple analytical model with two competing platforms, we show that the presence of ad blockers can actually benefit platforms. In particular, there are conditions under which the optimal equilibrium strategy for the platforms is to allow the use of ad blockers (rather than using an ad-block wall or charging a fee for viewing ad-free content). The key insight is that allowing ad blockers serves to differentiate platform users based on their disutility to viewing ads. This allows platforms to increase their ad intensity on those that do not use the ad blockers and achieve higher returns than in a world without ad blockers. We show robustness of these results when we allow a larger combination of platform strategies, as well as by explaining how ad white-listing schemes offered by modern ad blockers can add value. Our study provides general guidelines for what strategy a platform should follow based on the heterogeneity in the ad sensitivity of their user base.

Research Area(s)

  • ad blocking, ad sensitivity, ad intensity, competitive strategy, advertising, game theory

Citation Format(s)

The Beneficial Effects of Ad Blockers. / Despotakis, Stylianos; Ravi, R.; Srinivasan, Kannan.

In: Management Science, Vol. 67, No. 4, 04.2021, p. 2096-2125.

Research output: Journal Publications and Reviews (RGC: 21, 22, 62)21_Publication in refereed journalpeer-review