People are flocking to Netflix and Hulu, and it's a growing concern for advertisers needing to market to the rich

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Viewers are flocking to ad-free video services such as Netflix and Hulu, and the trend presents a big long-term threat to the advertisers trying to reach them.
Advertisers blame the shift on years of marketers flagrantly pushing out ads without regard to the user experience.
It's especially a concern for advertisers trying to reach high-income consumers who can afford to pay to avoid ads.
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As advertisers converge on the Digital Content NewFronts, the annual digital-ad marketplace, one elephant in the room is the rise of ad-free entertainment at the expense of traditional ad-supported TV.

Netflix is the most notable example, followed by the ad-free tier of Hulu and HBO, not to mention a slew of subscription-heavy services coming from Apple, WarnerMedia, and Disney.

On top of that, there's an increasing number of ways people are avoiding ads when listening to music or reading the news, whether by paying for services such as Spotify Premium, The Athletic, and The Information, or using ad-blocking software.

EMarketer predicted that by the end of 2018, 30% of internet users in the US would be using an ad blocker, up from 25% two years earlier.

Advertising to the wealthy will only get harder

Advertising-industry execs say the trend is the result of marketers flagrantly shoving ads in front of people for years without regard to the user experience.

"The fact is, the advertiser has polluted the experience," Barry Lowenthal, CEO of The Media Kitchen, told Business Insider. "We have terrible ad loads, web pages are horrible."

It's especially a concern for advertisers trying to reach high-income consumers who can afford to pay to avoid ads. Over time, that group will become harder and more expensive for advertisers to reach.

Marketers are increasingly finding the upscale consumer to be stronger in advertising avoidance, more fickle in engaging with content, and too time-poor to retain messaging, said Greg Paull, a principal at R3, a consulting company for brands.

In entertainment, it's really just been TV that has been ad-supported, and it's a significant portion of media consumption, Jay Friedman, the president of Goodway Group, said.

"Whether it's just the affluent or this becomes the norm for the majority of consumers, marketers need to face the fact that, while media consumption may be increasing, the opportunities we have to advertise to consumers may indeed decline in the next few decades," Friedman said.

Some, like New York University's Scott Galloway, have said that the consumption shift comes with societal implications.

"If people pay for ad-free, [advertising] becomes something you have to put up with because you're unable to afford an ad-free environment," Joshua Lowcock, the global brand-safety officer at Universal McCann, told Business Insider. "Then the question mark is: Who are you advertising to, then?"

Agencies also stand to lose if they can't adapt

Advertisers aren't overly concerned about it now, agencies say. They have more immediate worries, like making sure their ads don't pop up next to controversial or embarrassing content. Others aren't even paying attention.

"We're constantly surprised by how many super picky advertisers will throw caution to wind when buying YouTube," a luxury-media salesperson said.

Lowenthal said he believes advertisers will find a way to survive, but those workarounds might not involve traditional media channels and agencies.

"As of today, we can reach plenty of rich people in advertising," Lowenthal said. "But one day it'll be, 'Oh my God, I can't.' But at the same time as people want to avoid ads, clients don't need agencies. There's going to be enough clients doing it themselves, and it'll be too late to do anything about it."

Tanya Dua contributed to this story.

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