Individual Incentive Based Reward Policy for an Ad Exchange to Mitigate the Threat of Ad Blocking

Individual Incentive Based Reward Policy for an Ad Exchange to Mitigate the Threat of Ad Blocking

Rajeev Kumar (College of Business, Kutztown University, USA)
Copyright: © 2018 |Pages: 13
DOI: 10.4018/IJISSC.2018070102

Abstract

This article investigates the fairness of the existing business model of advertisement blocking and ad exchange companies by using exchange frameworks and equity theory. It then provides an individual-centric approach for an ad exchange, which aims to provide a fair compensation to individuals in exchange for their information and effort in the targeting and viewing/filtering of online advertisements. In this article, it is shown that by providing a higher value proposition to individuals in an online advertisement ecosystem, the ad exchange can not only increase individuals' equity in the system, but it can also mitigate the threat of ad blocking for publisher websites and advertisers. An efficient algorithm that estimates the monetary impact of the proposed approach and determines a fair monetary incentive—compensation—for individuals' personal information and actions—engagement—is presented in this article.
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1. Introduction

The rapidly growing multibillion dollar online advertising industry is also facing a growing threat (Economist, 2012; Gonzales, 2013). The threat stems from the fact that most of what this industry supplies, online advertisements, are not that much liked by viewers. As of June 2015, there were 198 million monthly active users of major browser extensions that block online advertisements from the browser of their users (Elmer-DeWitt, 2015). Use of mobile and desktop ad blocking software grew by 41% worldwide and by 48% in the US, between the second quarter of 2014 and 2015 (Elmer-DeWitt, 2015).

Advertisement blocking negatively affects the revenue of websites because it prevents some of their advertisements from reaching a portion of their audience, ad block users (Fisher, 2010). The impact of ad blocking has been extreme on the websites that have technologically savvy audience as these viewers are more likely to install and use ad blocking software. Some websites have observed that more than 40% of their visitors use ad avoidance software (Fisher, 2010; Gonzales, 2013). Advertisement blocking, however, has several advantages to its users. These benefits include quicker loading, cleaner looking web pages without advertisements, lower resource waste (bandwidth, CPU, memory, etc.), and privacy benefits gained by avoiding the tracking and profiling of ad delivery platforms.

The phenomenon of advertisement blocking has received tremendous attention over the Internet on blogs and news websites (Economist, 2013; Elmer-DeWitt, 2015; McHugh, 2013; O’Rielly, 2015; Williams, 2015). There are also some recent studies on this topic. For example, Wills and Uzunoglu (2016) evaluate ad blocking tools for their effectiveness in blocking the retrieval of different categories of third-party content during download of popular websites. Malloy et. al. (2016) estimate global prevalence of Ad Blockers and their impact. Pujol, Hohlfeld, and Feldmann (2015) study the use of ad blocking by characterizing ad-traffic in a residential broadband network of a major European Internet Service Provider (ISP) and discuss possible implications for the ISPs. Rasmussen, Wilson, and Hindle (2014) measure the energy consumptions from the use of ad blocking methods. Some of the previous studies have also considered the economic issues of ad blocking from the perspective of the entities impacted by this phenomenon. For example, Wilbur (2008) considers the issue of ad blocking from the perspective of a content provider (TV, websites), a setting similar to Wilbur (2008). Tag (2009) considers a setting where the content provider offers a subscription option by which individuals can circumvent advertisements while they purchase their content (TV, DVD). Anderson and Gans (2011) study the content provider’s strategies to counter ad avoidance technologies (blocking technologies) and show that it is doubtful that subscription can be a successful strategy to counter the full impact of ad avoidance. Some websites such as www.cbs.com are now starting to use ad block detection technology which can prevent their users from accessing the contents of the website without watching the advertisements. Vratonjic et. al. (2013) present a game theoretical model that analyzes the websites’ choice of implementing an ad block detection technology and individuals’ choice on whether or not to use ad block software. Johnson (2013) examines how the increasing ability of firms to target their advertisements to individuals influences market outcomes when consumers have access to advertisement avoidance tools. The paper shows that there exists a unique Nash equilibrium of the game in which each firm chooses an advertising volume µ, and consumers simultaneously decide whether to block advertisements. Haskins (2009), Snow (2005), Vallade (2008), and Walbesser (2011) investigate the issue of ad avoidance from a legal perspective. Hiraoka (2010, 2014) provide an industry level discussion of the field of search adverting, which is also an important topic within the area of online advertising.

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