Ad-Blockers: Extortionists or Digital Age Robin Hoods?

36 Pages Posted: 26 Jun 2017 Last revised: 22 Oct 2017

See all articles by Abhishek Ray

Abhishek Ray

George Mason University - Department of Information Systems and Operations Management

Hossein Ghasemkhani

Purdue University - Krannert School of Management

Karthik Natarajan Kannan

Purdue University

Date Written: June 23, 2017

Abstract

As a way to mitigate the impact of intrusive online advertising on users, ad-blockers have risen in prominence over the past few years. Initially dismissed by the online advertising industry as inconsequential, ad-blockers have evolved from a mere plugin tool on browsers to full-fledged platforms that derive benefits from certifying quality of advertisers and reducing disutility of users. However, the rise of ad-blocking has prompted discussions on the validity of its price structure and its impact on quality of advertising online. Many accuse ad-blockers of using an extortion-based business model, built on fleecing advertisers. Still others question whether ad-blocking will actually benefit online advertising quality. In this paper, we investigate these issues using a game-theoretic model consisting of four agents - advertisers, users, content provider and an ad-blocker. Through our model, we provide answers to questions related to the price structure of ad-blocker platforms, platform membership trends, quality of content provided and implications of similar platforms on social welfare.

Keywords: advertising, internet, online, google, adblocker

JEL Classification: M15, C72, D40

Suggested Citation

Ray, Abhishek and Ghasemkhani, Hossein and Kannan, Karthik Natarajan, Ad-Blockers: Extortionists or Digital Age Robin Hoods? (June 23, 2017). Available at SSRN: https://ssrn.com/abstract=2991805 or http://dx.doi.org/10.2139/ssrn.2991805

Abhishek Ray (Contact Author)

George Mason University - Department of Information Systems and Operations Management ( email )

4400 University Drive
Fairfax, VA 22030
United States

Hossein Ghasemkhani

Purdue University - Krannert School of Management ( email )

1310 Krannert Building
West Lafayette, IN 47907-1310
United States

Karthik Natarajan Kannan

Purdue University ( email )

Krannert School of Management
West Lafayette, IN 47907
United States

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