The issue of ad-blocking, and its impact on sustainable revenue, has been simmering for quite a while says guest author Justin Maxwell, founder and CEO of microdonations and micropayments platform tibit, who suggests one way of addressing the problem head on.

Some recent events have pushed ad-blocking into boiling territory over these past couple of months, first with Apple allowing ad-blocking apps into their app store, and then Yahoo trialing a system where some ad-blocking users found themselves blocked from accessing their own email accounts!

I used to run the Google Chrome extension Adblock Plus in my browser, full-time. Since starting tibit, it gets turned off for weeks and months, because I need to have a sense of how disruptive and/or intrusive ads on various websites have become – after all, we offer an alternative revenue stream, so being in touch with just how bad ad-swamp is getting in some places is important.

That said, I strongly believe that online ads have their place – historically and offline, advertising, casual consumers, and subscriptions have always had a balanced role to play in generating revenue for content producers and publishers.

But the dawn of the commercial internet brought with it a strange paradox – distributing content (and many simple services) became possible in a much more granular way – newspapers consumed by article, video content in short clips, document processing services by-the-page. It might not be reflected in the etymology, but byte-sized turned out to mean bite-sized as well.

And yet, exactly the opposite happened when it came to money. Pocket-change size transactions – like buying a newspaper, or tipping a busker – were, and remain, close to impossible online. And this is despite the need being so clearly obvious, that in the 1990s the likes of IBM and DEC/Compaq were working hard to solve it.

The web standards organisation, the W3C, were working on protocol extensions that would build micropayments into the very fabric on the web. Companies such as Beenz and Flooz burnt through something like $150,000,000 trying to establish their services – the money was there, because the need was so clear. If it wasn’t addressed, quality news producers would be going bust, advertising would swamp content. Hello, world!

So, if the need was blatantly obvious, why didn’t it work?

In the late 1990s and throughout the 2000s, an interesting debate was taking place – on one side, journalists and others who saw the impending consequences, and pleaded for a solution; and on the other, the insightful few who understood best “the case against micropayments” – which is the title of both a seminal 2000 essay by Clay Shirky, and an academic paper by Andrew Odlyzko in 2003. Some years prior, in 1996, Nick Szabo (who some suspect of also being ‘Satoshi Nakamoto’, the fabled inventor of bitcoin) presented his paper “The Mental Accounting Barrier to Micropayments”.

To summarize the essential point as I understand it: if something is only worth a few pence to you, the transaction is very easily overwhelmed by the barely-conscious evaluation of whether it is ‘fair’ — an evaluation that is instinctive and unavoidable, and which has also been observed in some non-human species. The unperceived ‘micro-anxieties’ involved are more quickly resolved by moving your mouse and clicking on the next thing that captures your eye.

Unless it’s an ad, of course.

So ad-blocking is a response to ad-swamp, and ad-swamp is a response to ‘The Micropayments Problem’, which turns out to be a result of a gene-deep response to being asked to pay 20p for something that might only be worth 18p. Rationally, no one cares about the 2p, but irrationally we just don’t want to pay more than we think is fair because that’s just how we work. This is why hundreds of millions have been spent, and lost, by investors on this issue.

Something not all that different happens with donations. If you walk past a busker playing a nice rendition of your favourite song, what she gets will depend more on what coins you have in your pocket than it does any precise evaluation of what would be the ‘correct’ amount.

But this doesn’t transfer to the online world – where you must choose precisely how much you are going to donate to whichever specific worthy thing. Subconsciously, it’s a lot simpler to move on, with some vague promise to yourself about ‘next time’, than it is to complete the transaction.

Over the past two decades, I’ve watched companies come and fail, over and over again, because they saw the obvious need and the real pain felt by everyone from individual creators to publishing giants, but ignored this cognitive barrier. Our very nature gets in the way of making this critical system work, yet in the push for a technical solution, no one has really addressed the human aspect of online pocket-change scale transactions.

In creating tibit, I started with the human factor and worked towards a technical solution. I think this approach is the only way to build an online world where ads have their place, where quality media can thrive, where users willingly contribute to support the content producers they appreciate.

Ad-blocking addresses the symptoms of a much deeper problem, and until it’s sorted, many publishers will continue the over reliance on advertising revenue, thereby ensuring that it is the companies who produce ad-blocking technology that have the best revenue forecasts.

Justin Maxwell is the Founder and CEO of tibit, a London based startup with a unique solution to ‘The Micropayments Problem’.

Finding himself eternally frustrated by things that don’t integrate as well as they ought, twenty years as a solutions architect came naturally. Encountering the hype around Beenz while consulting for CSC in 1999, he has been an intrigued follower of the debates about the viability of small online payments ever since.

A generalist, he has also worked with Hewlett-Packard Consulting, contracted to Defra, and been a corporate employee at New Zealand Insurance and Clear Communications.

While Justin built and launched an ISP in Auckland, New Zealand in 1994, he still feels very new to the startup game – and to wearing a job-title of ‘Entrepreneur’.  Despite being a Kiwi, he doesn’t conform to the rugby-nut stereotype. He still knows who won.

(Image at top via MarketingLand)