'Native' ads disrupt the digital advertising model
The native advertising push has been driven by social media, with Facebook pioneering sponsored stories and Twitter offering sponsored tweets as advertising vehicles that integrate with the content streams of those respective platforms. Digital publishers are now embracing the concept for their own web properties, offering native programs that integrate advertising and editorial. Their goal is to sell more of these premium programs to prevent digital advertising from devolving into a cesspool of low-CPM, programmatic buying.
Questions remain, however, about the effectiveness of sponsored stories, branded content or other attempts to commingle marketing messages with editorial content. Proponents call it “providing a consistent user experience.” Detractors say it blurs traditional church and state lines between editorial and advertising.
Worse, ads-as-content might actually damage brands. Survey results released today by MediaBrix show that the majority of online adults find native advertising – in any medium – to be misleading. Specifically, 45% found Twitter’s promoted tweets misleading, 57% found Facebook’s sponsored stories misleading, 66% found advertorials misleading, and 86% objected to sponsored video ads that appear to be content. The majority also said these types of ads negatively impacted or had no impact on their perception of the brand being advertised.
These results aren’t likely to deter publishers from crafting native offerings, however, as advertisers seek alternatives to traditional banners. Spending on online banner ads continues to grow, as more advertising dollars shift to digital, but the banner’s share of digital ad spend is declining. eMarketer says banners will account for 23.3% of digital ad spend this year, down from 23.6 in 2011 and further declining over each of the next four years. Spending on sponsorships, on the other hand, is expected to grow from 4.2% of total spend in 2011 to 4.5% this year, reaching 5.3% by 2016.
Sponsorships and other native ads can take several forms:
- Forbes BrandVoice (recently renamed from AdVoice) allows marketers to publish blog posts directly to Forbes.com, using the same publishing tools as Forbes’ staff and other third-party contributors. Forbes recently extended the program to include sponsored video content.
- Buzzfeed integrates “featured partner” content into its editorial stream. Company president Jon Steinberg told the Wall Street Journal that BuzzFeed's sponsored ads cost roughly the same as a premium display ad.
- Quartz, the new business brand from Atlantic Media, also integrates branded content into its editorial well, through its “Quartz Bulletin.” The site also offers a custom display unit that integrates rich media.
- The Atlantic has more traditional sponsored sections – aka microsites – that use the same design templates but are segregated from editorial content. These programs, such as Goldman Sachs’ Stories of Economic Progress, are promoted through banner ads and presented as Special Reports.
Bolstering banner ads
For the most part, these programs augment display ads instead of replacing them. At Forbes, for example, AdVoice participation is only available to advertisers as part of a larger ad buy. To date, those programs account for less than 15% of Forbes’ digital revenue. At the Atlantic, sponsored content brings in higher CPMs for related banners because The Atlantic has shown that click-through rates are higher when a banner is placed next to content from the same advertiser.
BuzzFeed, by contrast, no longer publishes standard ad units, focusing solely on branded content and sponsored posts. It believes it can scale this approach by selling promotional “story units” across other sites, which Ad Age’s Jason Del Rey describes as “an effort to create its own kind of native ad network.” (Del Rey also provides a detailed breakdown of BuzzFeed’s pricing model.)
The model appears to be working. BuzzFeed president Jon Steinberg told Nieman Journalism Lab’s Justin Ellis that digital revenues are expected to triple this year. “Social advertising is going to eat display advertising," Steinberg told the WSJ.
There’s still some question over how much native ads can scale into a profitable business for both publishers and advertisers. Randall Rothenberg, president and CEO of the Interactive Advertising Bureau, told Ad Age that custom advertising “passes costs up and down the supply chain.” Of course, the IAB’s raison d’etre is standardization.
Of course, not everyone agrees with that assessment. “I think the whole scale thing is a red herring,” BuzzFeed’s Steinberg told Digiday. “Scale is the last remaining value to the banner. … I can’t think of anything else where the attribute is scale.”
The challenge for publishers will be to find the right balance between native campaigns and traditional display units. They’ll also have to walk a fine line between integration and misrepresentation of vendor content relative to their own editorial assets. But done right, the brand-as-publisher model can deliver value for all parties – publisher, advertiser and yes, even the audience.
“On the social web, consumers want content they feel is valuable,” Forbes Chief Product Officer Lewis D’Vorkin said in a recent interview. “They want it from experts, and they want it transparently identified about who’s delivering it. That’s a model that will be very powerful across the media landscape.”