May 28, 2015 / 4:02 PM / 2 years ago

Rise of ad blocking threatens German publishers

* More than 30 pct of Germans online use ad blocking-PageFair

* Ad-blocking costs German publishers $889 mln/yr-Meetrics

By Harro Ten Wolde and Georgina Prodhan

FRANKFURT, May 28 (Reuters) - With two court victories against German media companies under its belt in as many months, ad-blocking start-up Eyeo is an increasing concern for publishers dependent on online advertising for growth.

Cologne-based Eyeo's Adblock Plus leads the fast-growing market for software to block Internet advertising that many users find intrusive or spoils their experience of websites.

More than 30 percent of Germans online use such software, far higher than the 5 percent of Internet users globally in 2014, according to Dublin-based analytics and advisory firm PageFair, which develops "ad blocker-friendly" advertising.

Philipp von Hilgers, MD of ad viewability measurement company Meetrics, puts the figure even higher for Germany, the world's fourth-biggest advertising market, where Internet users are unusually conscious of privacy and security issues.

"Ad-blocking software probably costs German publishers somewhere in the region of 815 million euros ($889 million) per year, based on 34 percent of Germans online using the software and display ad spend of 1.58 billion euros in 2014," he said.

A Munich court ruled on Wednesday that Adblock Plus did not breach laws on competition, copyright or market dominance, rejecting arguments brought by leading commercial broadcasters ProSiebenSat.1 and RTL.

RTL and ProSieben said they were looking into appealing against the ruling.

"We consider the product an attack on media pluralism and freedom of the press and we will therefore examine our options and further legal action against Eyeo," said Thomas Port, the head of SevenOne Media, ProSieben's marketer.

"MAJOR THREAT"

The ruling came just weeks after a Hamburg court handed the company, which has 37 employees, a victory in a case brought by German newspapers Handelsblatt and Die Zeit.

In August, another hearing against Eyeo is scheduled in a Cologne court in a case brought by Axel Springer, the publisher of Europe's best-selling tabloid Bild.

Eyeo said it was not facing trials outside of Germany.

Adblock Plus acts like a firewall between a web browser and advertising servers.

The software mostly is installed by end users on their desk-top computer or laptop and it blocks ads on websites and Facebook as well as video ads on Youtube.

Advertisers can avoid being blocked by requesting to be added to a so-called "white list" in return for a fee. The request is vetted by a panel of tens of thousands of users by Eyeo before being granted.

More than 400 organisations including Amazon and Microsoft are on that list and have already turned the 2011 start-up in a profitable business, an Eyeo spokesman said, adding that Adblock Plus has 50-60 million active monthly users.

This makes them the market leader, said Ed Barton, a TV analyst at Ovum.

"Certainly for online publishing, online news sites, it's a major threat to the business model. They're very, very effective at online display blocking," Barton said.

"Firstly, it was a very early mover. Secondly, it's incredibly user-friendly. Thirdly, there's a very well-curated list of sites to block so it's all done for you." ($1 = 0.9173 euros) (Additional reporting by Joern Poltz in Munich; editing by Susan Thomas)

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