Block the Adblockers? Strategic Choices of Competing Platforms and Their Impacts

Abstract

In recent years, the widespread adoption of adblockers has created significant challenges for digital platforms (e.g., websites) by limiting their ability to monetize content through advertising. In response, platforms have adopted divergent ad-recovery strategies: some deploy gates (antiadblock walls) that block access to users with adblockers, while others allow unrestricted access. Motivated by these contrasting industry practices, this article investigates whether and under what conditions platforms adopt the gating strategy. We develop a game-theoretic model in a duopoly setting, incorporating user heterogeneity and same-side network effects, to analyze the strategic decisions of competing platforms. Our analysis yields several important insights. First, in equilibrium, platforms adopt symmetric ad-recovery strategies: either both use gating, or both use no-gating, driven by the interplay between gating costs and ad revenue. Second, regardless of the competitor’s strategy, a platform adopting gating sets a lower ad intensity than one that does not. Third, contrary to general intuition, we find that blocking adblockers does not always improve a platform’s profit. When the cost of deploying and maintaining gating technologies is sufficiently high, the net profitability of gating may fall below that of the no-gating alternative. Finally, although consumer surplus declines under gating, social welfare may increase when gating costs are low, as the gain in platform revenue offsets the consumer utility loss.