Whitelisting versus advertising-recovery: Strategies to overcome advertising blocking by consumers

Abstract

The significance of online advertising as a primary revenue stream for digital media cannot be understated. However, the rising adoption of ad-blocking software by users has adversely affected these revenues. In response to this challenge, digital publishers are exploring various strategies not only to maintain their revenues, but also to enhance them through online advertising, in addition to paid subscriptions. We discuss three potential strategies to overcome ad-blocking. The first is the subscription fee strategy, termed the benchmark strategy in the paper, wherein users pay a subscription fee to access content without encountering any ads. The second strategy is whitelisting, which involves publishers seeking users’ consent to display acceptable ads that support the website. The third approach is ad-recovery, which employs a third-party service to continue displaying ads even to users employing ad-blocking software. We utilize a duopolistic game-theoretical framework and identify conditions under which digital publishers might adopt either symmetric or asymmetric strategies to counter ad-blocking usage. We find that both firms tend to opt for whitelisting when the advertising revenue parameter is relatively low, and the proportion of consenting ad-block users is relatively high. On the other hand, when the advertising revenue parameter is high, and the proportion of consenting ad-block users is low, both firms benefit from an ad-recovery strategy. Further, under some conditions, firms utilize asymmetric strategies. The analysis suggests that a number of consumer- and firm-level factors represent important determinants of the digital marketing strategies of media firms.