Go Native, Ad Man

Why native advertising will work for social media but no one else.

The lens through which I view the media world is pretty simple: If you are in the business of sucking up attention, then you are in the media business. Both old and new publishers, from The New York Times to BuzzFeed, are media entities, but so are Internet services such as Twitter, Snapchat, Instagram, and Facebook. And every brand on earth. They all want time from my day.

Making money from my time is not easy: Although online display ads grew 32% last year, that's mostly because the world is creating additional inventory (more web pages) by the nanosecond. People pay little attention to banner ads--in fact, everyone dislikes them--and that leads to infinitesimally small click-through rates that make marketers unhappy. Improvements in targeting and the rise of sophisticated algorithms that buy inventory in real time have been squeezing margins out of the business. As a result, the price brands are willing to pay to attract a user to click on an ad continues to decrease.

Worse, web dwellers like me are becoming increasingly twitchy. A recent study shows that the average attention span at the end of 2013 was 8 seconds, a 33% drop from 2000, when it was 12 seconds. The same study reveals that about 17% of page views last less than 4 seconds. Only 4% of page visits last more than 10 minutes.

The media industry has seized upon what's known as native advertising as its latest ­panacea to address these ills. Its definition can be a bit murky, but to me native advertising is a sales pitch that fits right into the flow of the information being shown. It doesn't interrupt--native ads don't pop up or dance across the screen--and its content is actually valuable to the person viewing it. And that, in turn, leads to a higher percentage of users engaging with the ad, and to greater effectiveness.

But here's the rub: Native advertising may be a cure-all for digital media, but not for the publishers, both old and new, who have embraced it most ardently.

When Google Went Native

Think back to the early 2000s, when Google launched its text-based advertising. Why did it work? Because when you searched for something, the few ads that showed up alongside the "editorial" results were useful. If you searched for Disney, it didn't matter whether you clicked on the No. 1 return or the Disney ad above it. They both took you where you wanted to go, and as a result, Google ­became the most dominant Internet company in the world.

Google ads were an early (and very good) form of native advertising. Those small text ads weren't much to look at, but they fit within the spirit and design of the site. Similarly, ­e-commerce hubs such as Amazon and Etsy have had success including ads for products available on other sites in their search ­results. Amazon makes listings for its advertisers' products that look much like its own. These ads work because they enhance the overall customer experience.

Facebook Takes the Baton

Facebook recently introduced a new kind of advertising unit that addressed its biggest problem: generating revenue from its mobile users without annoying them. These ads, which suggest other apps you might be interested in downloading (and developers pay for the new users they attract), are smart enough in what they recommend that I have clicked on four of them in the past few weeks to install the apps, without thinking twice about these being ads. I'm not the only one: These ads helped Facebook generate $1.24 billion in mobile-only revenue in the fourth quarter of 2013. Facebook executives have been adamant in saying that they are turning away from pushing more ads into users' feeds and focusing instead on delivering better ads with better results. These native ads are a promising start.

Facebook seems to understand native advertising, because when the time came last fall to try to make money from its Instagram photo-sharing service, Instagram developed a unique-to-Instagram ad offering. These spots, from companies such as Burberry, Lexus, and Michael Kors, look exactly like the other beautiful, artfully cropped and filtered images in your feed. "Are they making us hundreds of millions of dollars per day? No!" says ­Instagram cofounder and CFO Kevin Systrom when I ask. But he's encouraged by the results so far. Instagram's first several campaigns, Systrom says, were five times more likely to be remembered by viewers in ad-recall studies than the typical digital ad. "And that's pretty tremendous considering that we ignore most of the ads we see on the Internet."

Why Social Media Is Native Turf

Last September, Pinterest CEO Ben Silbermann announced on his company blog, "We're going to start experimenting with promoting certain pins from a select group of partners." Tumblr's best-known content format--the animated GIF--is also an ad type that brands can play with. In January, the dating app Tinder let Fox create profiles for the characters in the sitcom The Mindy Project as part of a promotion.

All of these examples--not to mention Google, Amazon, Facebook, and what's happening on Foursquare, Whisper, and ­elsewhere--share certain traits. All of these services have gargantuan audiences in the tens or hundreds of millions. They don't pay for content. In fact, those millions of users create content for them. They all have a format that's a great match for ads, too. Most important, though, they have a treasure trove of demographic data, such as gender, age, location, and even the time of day when you use their services, which allows them to be surgically precise in offering the right ad at the right time in such a way that's hard to distinguish from content. Silbermann put it best when he told The Wall Street Journal, "If you look at the most successful [web] companies, they really found a great intersection between what people are there to do and what advertisers want to do. They made the formats make sense."

New Media's Same Old Problem

Compare those benefits that Pinterest and its peers have going for them to what digital publishers, from Gawker to The Guardian, have working against them. Traditional ­players such as The New York Times have ad-friendly demographics but aren't remotely as big and aren't growing fast enough. New entrants such as BuzzFeed, which claims it has more than 130 million unique visitors a month, have the scale of social media but offer up mostly lowest-common-denominator content to get there. Everyone's diverse array of articles, listicles, photos, and slide shows is great for readers but inhibits native advertising's growth because you can't build a single repeatable format.

That's why native ads will not be sustainable for publishers or their advertisers. The hits can be fun--kudos to Gawker for getting a lot of buzz with a clever tack like "We've Disguised This Newcastle Ad as an Article to Get You to Click It," but it can never use that trick again. Worse, hits like that defy my definition of native advertising: They interrupt me. And that means, for publishers at least, expect native advertising to go the way of the pop-up ad.

[Illustrations by Ross Proulx]

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3 Comments

  • I understand how native advertising could be perceived by some as the "latest panacea." There are a never ending stream of such cure-alls for what ails media, often inflated through breathless press reports. As with any media revenue strategy, there is no single approach. And smart companies know that over-reliance on one revenue stream is more than more than a little risky. While it is laudable that a wide range of media brands are incorporating native offerings, few I've interacted with see it as the solution to digital advertising challenges; it is part of a well-planned larger strategy. And successful strategies require continuous experimentation and innovation.

    Now let's look at the issue of quality at scale, which you allude to in your comparison of Gawker to the Wall Street Journal or New York Times. It has been proven in any number of markets that quality merits a higher price. So one hopesthat native advertising partnerships--in which media and marketers work together

  • Ouriel Ohayon

    Brilliant post Om. Usually posts on "Native Advertising" are limited to people thinking about them as "paid editorial content" vs the broader definition which is an ad format integrated and blended in the flow of the experience. The critical limit of paid editorial content is that in a native app world (meaning in a world where the huge majority of the content is consumed in a native app and not in the browser), you can t just hope native editorial ads to perform so well because the next step for action can only perform well in an another native app. Disrupting the ad click experience with a browser session would actually ruin the expected conversion.

    This is why Facebook ads work so well: they don t force you out and they keep you in the loop

    In addition there is an "access" to data/content/user profile problem. Publishers needs the network effect of 3rd party ad networks to help them make ads contextually relevant: just a stupid example > don t show ads of products i own.

  • So, then what happens? Who will fund extraordinary content development? Where will all those programmatic $$s end up? I agree with Mr. Malik's points here entirely, just curious as to the author's POV on what happens next, after his suppositions are proven correct.