All Hail the Rise of Native Advertising

Native advertising, sponsored content or branded news (all the same) is booming and with some online publishers it's now their main source of revenue.

It's important to note that native advertising is not content marketing. Content marketing is a content strategy by brands where typically, they own the content, such as their blogs or content on a product website. Native advertising is sponsored content, more typically created by the publisher to be in alignment with an audience that the advertiser wants to reach. I think where the confusion happens is when an advertiser creates biased and conversion oriented content that is placed on websites for a fee. To me, that's content marketing more than native advertising because content marketing has evolved to be measured by conversions, while native advertising looks at other metrics.

Fractl and Moz conducted a survey of more than 30 content marketing agencies and obtained cost data from more than 600 digital publishers and determined that "content marketing has a better overall return on investment."

"Readers are necessarily less engaged with advertising vs. editorial content, and metrics show lower share rates, lower engagement rates, lower view counts, etc. in most cases," said Kelsey Libert, partner and vp of marketing at Fractl. "You can’t simply push through a mediocre, thinly veiled advertorial. Content marketing puts the brand and the consumer on equal footing, and in the process necessitates the brand elevate the content they are creating. When done correctly, the result is a true match between brand and content consumer, where the content created has true value, and spreads based on the merit of the content. Through this, content can enjoy true virality in a way that is nearly impossible with Native ads."

"The fact that people find it necessary to pit one form against the other is a little bemusing," said Cas McCullough, Founder at Writally PTY LTD, in a comment on Adweek. "When used together, good content and native ads are very powerful. On their own they don't get the same ROI. Our case studies prove this consistently, so we'll stick with an integrated approach."

Sites such a Buzzfeed and Vice have built their entire business model around native advertising. Slate says that it now relies on native advertising for nearly 50% of its revenue. According to Digiday Slate trained its 10-person sales team on a its new native ad product called Slate Custom, and also hired Jim Lehnhoff, the former head of Gawker Media’s native advertising strategy. The goal with Slate Custom is to make native ads that are aligned to Slate's "edtorial DNA."

“The differences between five years ago and now, in client expectations, are enormous,” said Keith Hernandez, the president of Slate, in a New York Times article on native. "Creating something that’s delightful and that’ll make someone stop and click and share…that’s really hard. But doing the easy thing is not fun.”

The Atlantic's Hayley Romer, their Publisher, expects "native campaigns to drive 70 percent of its ad revenue this year, up from 60 percent in 2015."

"We know that our audience is engaging really deeply with our native content on our site," she was quoted as saying in a NiemanLab article.

The 2016 Reuters Institute’s Digital News Report, the largest study of its kind, based on more than 50,000 people in 26 countries, was released recently (PDF) and shows the rise of sponsored content. Here’s a chart from the Report:

The report noted that with existing models of online advertising increasingly broken, publishers have been trying alternatives such as "branded and sponsored content." Sponsored content still has numerous legal and political obstacles, with labeling "sponsored" still an area of confusion. Geographically, the US and Canada are most accepting, while Germany and Korea branded content faces tremendous consumer confusion and resistance.

The New York Times has created a 100-person native ad unit, T Brand Studio, in a huge push for native advertising revenue. The Times is openly declaring "sponsored content to be an important part of their strategy.".

The motivation for publishers in looking for a new monetization model for their digital properties is the continued weakness of online display advertising.

"Display still has a place, but we believe that the digital advertising of the future will be dominated by stories conceived by advertisers, clearly labelled so they can be distinguished from newsroom journalism, but consumed alongside that journalism on their own merits," said New York Times CEO Mark Thompson in a commentary in the above report. "This is a more compelling and creative vision of digital advertising than conventional digital display, and it requires new skills, talents, and technologies, and substantial fresh investment. Audience scale and global reach will still count, but the audience which publishers will need to find will not be super-light users, the one-and-dones who spend a few seconds on many different sites, but truly engaged readers and viewers who are prepared to devote real time to content of real quality and relevance."

Thompson is adamant that the editorial and commercial sides must work as one. "Editorial and commercial leaders need to work together on integrated strategies which combine editorial mission and standards, user experience, innovations in data, technology and creative design, and radically new approaches to monetization," he said. "Not five different strategies, not even ‘aligned’ editorial and commercial strategies, but a single shared way forward."

Sponsored content does not have to be biased content, but instead can be content that is paid for by an advertiser, because that advertiser wants to reach the type of people that read a particular content subject area.

Interestingly, a study (PDF) by the Internet Advertising Bureau (IAB) and Edelman in June 2015 uncovered that consumer perceptions of sponsored content isn't all negative.

Roughly 45% of those seeing sponsored content related to business or entertainment recognized the value-add.

The IAB study says that brand relevance, authority, and trust are the most important factors to driving consumer interest in sponsored content across all media. "Make the ads and product more on target… also give info [on] how to enhance the experience with the latest and best products," commented one consumer interviewed in the study.

The value (or lack of value) for the advertiser is that the credibility of the site hosting the sponsored content is largely transferred to the advertiser.

Sherrill Mane, formerly of the IAB and currently Head of MAdTech Strategy, and Steve Rubel, Chief Content Strategist for Edelman recommend these steps for publishers that intend to incorporated sponsored content:

• Control the experience and be prepared to walk away from advertisers who aren’t relevant/trusted
• Encourage aligned brand marketers to work together in a more authoritative manner
• Go the distance when it comes to transparency/disclosures

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