Leila Abboud | Vox

In Bringing Ad Blocking to iPhones, Apple Gives Itself a Boost

2019-03-06T06:02:22-05:00

Apple’s move to make ad-blocking software available on the iPhone is a double-barreled effort to boost the health of the so-called app economy, while undermining arch rival Google, which dominates the $120 billion online advertising market.

The new version of the iPhone operating system, to be released Wednesday, will for the first time allow customers to download third-party software that strips out marketing messages such as banner and video ads when people surf the Web via the Safari browser.

A slew of ad-blocking apps for iPhones are expected to launch this week. But Apple’s new approach will not affect advertising inside applications such as Facebook, casual games like those from Supercell or King, or Apple’s own apps.

Apple is in effect nudging big brands to shift spending to apps, rather than traditional online ads where Google leads.

Ad-blocking software has been growing rapidly on desktop computers, led by early adopters among tech-savvy young people, but until now was rare on mobiles.

Some 200 million people used ad blockers last year, up 40 percent from a year earlier, resulting in $22 billion in lost advertising revenue, according to a study by Adobe and PageFair, an anti ad-blocking tech company.

Although only about 5 percent of Internet users globally use the tools, they are especially popular in Europe. In Germany and Poland, for instance, the figure is above 30 percent.

Broad adoption of ad-blocking would bring a new set of headaches for online publishers, many of whom are already struggling with plummeting ad prices.

In a nod to publishers’ concerns, Apple will also on Wednesday launch a new app, called News, which will allow media companies to bypass blockers to serve their own ads or let Apple sell ads and share the revenue.

Google, too, could take a hit from Apple’s making ad blocking mainstream, if its own search advertising, as well as the banner ads it manages for publishers through its DoubleClick unit, were regularly blocked by a significant portion of Web surfers.

Apple has not publicly explained why it decided to allow ad blockers on its mobile phones, but Chief Executive Tim Cook gave a hint in June when he criticized Internet companies for violating people’s privacy to boost ad revenue.

“They’re gobbling up everything they can learn about you and trying to monetize it,” Cook said in a speech. “We think that’s wrong. And it’s not the kind of company that Apple wants to be.”

Ad-blocking tools should help Web pages load much faster on mobiles, as they strip out scripts and trackers that are used to serve up the ads. Some early pilots have shown media outlets like Vice and the New York Times loading twice as fast.

Surfing the web with fewer ads will also mean people will consume fewer megabytes of their mobile data plans.

“Ultimately Apple wants there to be a better consumer experience on mobile, and lots of ads on smartphones are really intrusive,” said Danielle Levitas of research firm App Annie. “And there is an added benefit that this move will hurt their competitors more than them.”

Media companies are groping for answers, sparking an arms race between ad-blocking companies and anti-ad blocking companies such as PageFair and Sourcepoint that try to disarm the systems for website owners.

Some like U.S. broadcaster NBC will not allow people using ad blockers to watch videos on their sites, while newspapers the Guardian and the Washington Post are prodding people using ad blockers to sign up for subscriptions.

Apple’s new policy could also force publishers who don’t already have them to develop dedicated iPhone apps, rather than relying on mobile-friendly websites.

German broadcasters ProSieben and RTL and newspaper publisher Axel Springer have filed lawsuits against Eyeo, the German company that makes Adblock Plus, the most popular ad blocker for desktops. They have lost two early court cases, although appeals are pending.

Apple’s move will open a new front in the fight. Eyeo put its free iOS and Android apps on the market last Tuesday, and others include 1Blocker, Blockr and Crystal.

A spokesman for ProSieben declined comment on Apple’s move but said the TV company was “looking into several technical alternatives to bypass AdBlocker software.”

Roi Carthy, chief marketing officer for Shine, an Israeli startup that sells ad-blocking technology to telecom carriers, said that over time Apple could even try to play an enforcement role by setting standards for advertising in apps.

“Since Apple controls what appears in the App Store, it could try to push developers to clean up the ad formats, to make them lighter or smaller,” Carthy said.

“But Apple will not cripple ads in apps — they have an interest in maintaining the ecosystem where the bread and butter is monetization via third-party ad platforms.”

(Additional reporting by Harro Ten Wolde in Frankfurt; Editing by David Holmes and Jonathan Weber)

This article originally appeared on Recode.net.

Publicis to Buy Digital Ad Firm Sapient for $3.7 Billion

2019-03-06T05:56:03-05:00

Publicis, the world’s third-largest advertising agency, will buy U.S.-based digital ad specialist Sapient for $3.7 billion in cash as it seeks to accelerate growth after a botched merger earlier this year.

The French group is hoping rapid growth in both North American and Internet advertising, which are far outpacing European and traditional ad formats, will help it catch up with sales gains at rivals such as WPP and Interpublic.

Chief Executive Maurice Levy has blamed Publicis’ recent poor performance on a failed merger with world No. 2 ad agency Omnicom, announced in August 2013 and abandoned in May over control and cultural clashes.

But some analysts said Publicis’ offer of $25 per share, a 44 percent premium to Sapient’s closing price on Friday, was a hefty price for a company whose growth may have peaked, and that the deal could also dash hopes among the French company’s shareholders that cash might be distributed to them.

Publicis shares fell as much as five percent in early Monday trade.

“A good asset at a steep price,” said Exane BNP Paribas analyst Charles Bedouelle of the deal, adding it would “likely push back (Publicis’) cash return story by two years.”

UBS analyst Tamsin Garrity said Publicis had been under pressure from investors to return cash, and was expected to announced share buybacks at a strategy day on Friday.

“The acquisition of Sapient makes such returns unlikely,” she added. Garrity has a neutral rating on Publicis shares.

Levy defended the decision, saying the company would generate more value in the long term by buying Sapient rather than buying back its own shares. He pledged to update investors on his approach to dividends and buybacks sometime in November.

“This operation is extremely important for securing the future of Publicis,” Levy said. “It is far better to invest and deliver a higher growth and higher profits … which will lead to a re-rating, rather than simply buy back our own shares.”

“The deal will create a foundation for accelerated growth” by giving Publicis access to new markets and revenues, he added.

Publicis said the deal would be financed through existing cash and new debt, and would not affect Publicis’ credit rating. It did not say when it would add to group profits but forecast 50 million euros ($63 million) in annual cost savings.

Sapient’s sales grew 14.1 percent to 1.1 billion euros last year, far outstripping Publicis’ sales growth of 1.2 percent, though the French company had a higher operating profit margin. The U.S-based group earned 63 percent of its 2013 sales in North America and has 13,000 employees, 8,500 of which are in India.

“The risk that growth slows at Sapient is one of the transaction’s more important considerations,” said Pivotal Research Group analyst Brian Wieser.

He noted the deal gave Sapient an enterprise value (equity plus debt) of around 12 times its forecast earnings before interest, tax, depreciation and amortization (EBITDA) for 2015, far above Publicis’ current multiple of about eight times.

Martin Sorrell, the chief executive of Publicis’ rival WPP, was even harsher, telling financial blog Business Insider that Publicis had rushed into the Sapient deal to compensate for its botched marriage with Omnicom.

“It looks like the behavior of a jilted lover,” he said.

Buying Sapient will speed Publicis’ roughly seven year-old effort to earn more revenue from digital advertising, which includes everything from online marketing to brand building on social networks and automatic ad buying for major customers.

Last year, 38.4 percent of Publicis’ sales came from digital, and it had been aiming to reach 50 percent by 2018, something that the Sapient deal will make happen immediately.

According to Zenith Optimedia, the digital ad market is expected to grow 17.1 percent this year, driving total ad market growth of 5.3 percent.

Sapient’s main SapientNitro unit is a digital agency on a par with Publicis’ Razorfish and WPP’s Akqa, with customers including carmaker Fiat, retailer Marks & Spencer and consumer goods group Unilever. Sapient also has a technology consulting business serving government and banks, which brings in a third of revenues but is less profitable than the ad business.

Publicis’ management and supervisory boards unanimously backed the deal, as did the board of Sapient, which will recommend shareholders tender their shares. As a result, Sapient will be de-listed from the Nasdaq stock exchange.

Sapient boss Alan Herrick will continue to run the company and join Publicis’ management team, while Jerry Greenberg, the co-chairman of Sapient’s board will join Publicis’ board.

The transaction is expected to close in the first quarter of next year. Citigroup has committed to financing the bid.

Bank of America Merrill Lynch and Rothschild advised Publicis, while Goldman Sachs and Blackstone advised Sapient.

(Editing by David Clarke and Mark Potter)

This article originally appeared on Recode.net.