Ad-Blockers and Limited Ad-Blocking

Abstract

Ad-blockers enable consumers block ads on websites. While ad-blockers began as user-oriented initiatives promising to block all ads, many now allow websites to display a limited amount of ads. We examine whether, when and how, a user-oriented ad-blocker that maximizes the welfare of its ad-averse users, may nevertheless employ limited ad-blocking (LAB). Accounting for consumers’ ad-blocker adoption and website publisher’s content quality decisions, we show that LAB can benefit ad-blocker users by incentivizing content provision, but may do so only if consumers’ ad-blocker adoption cost is sufficiently high. Moreover, incentivizing content provision may require that LAB not only improves publisher’s ability to monetize high-quality content but also constrains its ability to monetize low-quality content; essentially discouraging ad-blocker users from visiting low-quality websites by not blocking all ads. Despite the debate and controversy surrounding ad-blockers and LAB, we find that they may in fact facilitate “a better world for all”: LAB may emerge as a means to discriminate ad intensity across consumers, resulting in higher ad revenue, content quality, consumer surplus and even publisher profit under a user-oriented ad-blocker than in its absence. Interestingly, raising ad-blocker adoption cost can benefit ad-blocker users, leading a user-oriented ad-blocker to charge users a fee.