A common prediction for 2015 was the mainstream arrival of native advertising or the purchasing of sponsored content on social networks and online news sites. Pushing this trend is banner ad blindness; the viral brand lift gained from native ads; and a user migration to mobile platforms that do not accommodate traditional display ads. Add to that the pressure publishers are feeling to fill the gap of declining display ad revenue, and the growing popularity of native advertising becomes clearer.

But will native advertising eventually take over display ads for small and medium sized businesses? If so, how quickly will it be adopted, and how will it change the marketing landscape?

To answer this, the following includes a review of its current state of adoption along with the industry momentum required to overcome its primary challenges of scalability and transparency.

What is Native Advertising?

A clear grasp of native ad trending first requires an adequate definition of what constitutes native advertising especially since a universally accepted definition is still in the making. But for now, let’s define it as  “the use of content-based ads that match and live within the stream of editorial-type content, while contextually following the experience of the publisher’s platform.”  i.e., finding the sweet spot between advertising and publishing content.

But finding this sweet spot has been quite a challenge for brands and publishers confronted with issues like transparency and disclosure of native ads as “ads”. The mere fact that the ads are created to blend in with content often confuses the reader with what is promoted and what is editorial. 

Some of the more notable definitions proposed by reputable content marketers and advertising boards include the following:

“…Native advertising is a “pay to play” opportunity that is content based and delivered In-Stream while not disrupting the user experience…The information is intended to be useful, interesting and highly targeted to the specific readership and is delivered in a way that does not impede the normal behavior of the user in that particular channel…”

-          Joe Pulizzi, Content Marketing Institute

“…Native advertising is a form of converged media that combines paid and owned media into a form of commercial messaging that is fully integrated into, and often unique to, a specific delivery platform…”

-          Rebecca Lieb, Altimeter Group

“…Native ads are purchased ads that mimic content in the venues in which they appear. They are more entertaining and less interrupting than traditional ads, and hopefully popular enough to get shares…”

-          eMarketer

“…Native social advertising is the branded content integrated directly within a social network experience (i.e., the newsfeed or content stream). These integrated, advertorial qualities differentiate native ads from traditional display…”

-          BIA/Kelsey

“…Native ads are paid ads that are so cohesive with the page content, assimilated into the design, and consistent with the platform behavior that the viewer simply feels that they belong…”

-          IAB Native Advertising Playbook

“…Native advertising entails taking that which is organic and flipping it around into advertising…”

-          Howard Greenstein, Harbrooke Group

In attempting to narrow down the most important elements of a native ad definition, the Online Publishers Association concluded the following from a survey of online publishers.

Source: Online Publishers Association (OPA) Study in Partnership with Radar Research 

Common to many definitions is the acknowledgement of native ad as a convergent media (placement paid, content owned and sharing earned) that covers sponsored content found in new sites (e.g., Forbes.com, BuzzFeed, Mashable and The Atlantic), advertorials, promoted/sponsored social media content and content recommendations. Some would argue it also includes sponsored searchable content as well. Finally, many acknowledge the dual objective of native ads to (1) ‘stand out’ for reader awareness and (2) ‘fit in’ with non-disruptive, opt-in content. 

Another area of debate in attempting to define uniform standards for native ads are the various media formats they represent. In their Native Advertising Playbook, the IAB identifies and provides examples of six types of ad units most often described as native:

1. In-Feed Units
2. Paid Search Units
3. Recommendation Widgets (e.g., “From Around the Web”)
4. Promoted Listings
5. In-Ad with Native Element Units (e.g., banner with text or preceding a post)
6. Custom Campaigns

The wide variance in formats has much to do with the ad’s fit to form (e.g., in-stream vs. out of stream); its match to function (e.g., video on a video or story among stories); match to surrounding content (e.g., mirrors page content behavior); its target specificity and guarantee of location placement (e.g., narrowly vs. broadly targeted placement); and its metric objectives (e.g., views, likes and share for top-of-funnel brand engagement vs. sale, download, register for bottom-of-funnel direct response).

In its most limited form, these ads could include sponsored posts found in many social platforms.

Examples of Social Sponsored Content

At the other extreme are long-form narratives including featured news article or videos hosted in major publications. Although the publications were once the domain of social news aggregators such as Buzzfeed, Gawker, Mashable, Forbes, The Wall Street Journal, The Atlantic, Business Insider and The Huffington Post, an estimated 90% of publishers are now offering native ad offerings.

Examples of Branded Content in News Sites

Why all the Hype?

No doubt the content marketing craze has reshaped a marketing landscape once riddled with digital display ads.  According to Patrick Albano, Co-Chair of IAB Native Advertising Task Force, “this renaissance in digital advertising is driving brands, publishers and consumers to communicate with each other in more personal and natural ways.”

What has likely delayed a more widespread adoption of native ads are the mechanisms to scale and integrate them into editorial content acceptable to publishers. The pace of adoption is likely to increase, however, due to revenue pressures.  Many publishers are feeling the pinch of ever shrinking display ad margins as a greater number of blogging sites, social news sites and social platforms are staking claim to available ad space. This over-supply of inventory, coupled with consumers being clobbered with overwhelming ad noise, is forcing publishers to adopt some form of native advertising.

Brands see these content-based ads as a far superior approach to brand affinity lift and consumer engagement than can ever be realized under traditional display advertising. Banner ads, in particular, are not conducive to social sharing or to mobile usage. And it is this lack of mobile adaptation that is most concerning to traditional display advertisers since mobile is expected to overtake desktop web viewing in the not too distant future.

In a detailed evaluation of the native ad landscape, Altimeter Group’s Rebecca Lieb highlights the many reasons why brands, publishers, social networks and advertising agencies stand to gain from a widespread adoption native ad formats.  Common to all parties is a drive for:

1. New revenue streams
2. A potential for deeper behavioral/contextual data
3. Target audience opt-in to content

How Far will it Advance?

Among the hold-ups barring parties from embracing native ads more extensively is the potential of native ads to deceive its readers. In particular the Altimeter Group study cites transparency and disclosure as major concerns especially in light of the ethical sensitivity towards ad content that is mistaken as editorial content. Perhaps no one sheds light on this concern better than the hilarious John Oliver in his HBO feature on Native Advertising.

This issue came to a head in the infamous publication by The Atlantic of David Miscavige’s salute to Scientology. The Atlantic posted an advertorial package for the Church of Scientology, which was subsequently inferred by many as an editorial piece endorsed by the publication.

Another issue suggesting a more limited roll-out of native ads is its scalability to so many diverse publication standards. Compared to banner and other display ads, native ads are not portable across platform formats. To scale them optimally across publications, a great deal more is required to make them contextual relevant while also having them fit seamlessly into a publication’s form, fit and function. Banners, on the other hand, merely require compliance with universally accepted placement standards, something yet to evolve for native ads.

Much progress has been made in this area, however, as technology companies jump into the fray. Sharethrough, Outbrain, Taboola and Disqus are among the 40 technology firms listed in the Altimeter Group’s review. To date, these predominately software companies have been able to sort and configure the many content, creative and social metric elements associated with native ads to where they are becoming increasingly programmatic across multiple publishing platforms

So How Much of the Landscape will Shift towards Native Ads?

According to BIA/Kelsey and eMarketer, U.S. native social advertising revenues are forecast to grow from $1.6 billion in 2012 to $4.6 billion in 2017. The near 23%/yr. compounded growth reflects the higher engagement results seen from native ads. It also attests to the rapid adoption of native ads by publishers, many of which are finding engagement rates of native ads to approach those of their editorials.

Even the more minimal in-feed native ad placements and promoted listings we see on social networks are demonstrating the efficacy of native ads. According to a study by Interpublic Group’s IPG Media Lab and Sharethrough, consumers looked at sponsored content 52% more often than banner ads. The same study showed native ads generated 9% higher brand affinity lift and 18% higher purchase intent response than banners. Finally, the study found that 32% of respondents said the native ad “is an ad I would share with a friend of family member” versus just 19% for display ads.

This bodes well for what seems to be a welcomed attraction to the marketing landscape. Consumers can now view our marketing messages as part of an overall brand story told in the context of something relevant to what they are reading. Brands benefit when the consumer shares the content-ad. The more the engagement, the greater the brand affinity lift especially when the ad is seen as relevant and useful. Finally, publishers benefit from a new source of revenue to offset a dismal decline in display advertisements.

When will Small Business See the Impact?

So far the momentum behind native advertising has mainly benefited large brands that have the resources and relationship with news publishers. The scalability issues have been reasonably addressed to date with tighter brand/publisher collaboration. Publishers, in some cases, have even hired dedicated staffs to manage native ad content. 

Minimums to play in this arena, however, are quite high given the growing demand for premium placement of native ads. Add to that the time consuming collaboration required of this convergent media to represent both brand and publisher interests, and you can see why smaller businesses may not be so quick in their adoption of native ads.

But with the growing adoption of big data into contextually relevant platforms, expect to see a roll-out of limited in-feed native ads for small businesses. Though not as customized as the multi-platform narratives used by big brands, these more affordable alternatives are being aggressively promoted by native ad integrators  (e.g., ShareThrough.com) and news sites. 

BuzzFeed, in particular, has had recent success in building a native advertising ad network on other publisher homepages. Should they and others elect to broker their native ad placement capacity,  small businesses may have an answer. This assumes, however, that these native ad integrators or publishers can auto-configure content-ads to suit the standards of multiple platforms.

But the adoption by small businesses of native ads may be hindered more by a mindset than technical solutions to scalability. Small businesses may be slow to embrace the true essence of native advertising.  For example, it’s one thing for Coca Cola, Chipotle and Dell to piecemeal powerful brand stories over numerous branded content placements. They have the vision and appreciation for content strategies that justifies a long-term investment. But it’s another thing for small businesses to embrace this type of narrative especially where results in brand buzz and brand affinity lift may not be so readily measurable.

Small businesses will have to be courted, in part, by publishers and agencies willing to train them on native ad scaling as well as in making content contextually relevant. In essence, these small businesses will have to understand that native advertising has as much to do with complementing editorial content as it does with catching the eye of a waiting prospect. This perceptual shift from fitting in over standing out will undoubtedly require a new leap of faith. 

As best said by Patrick Albano of Yahoo!, “The challenge with native is finding that sweet spot between fitting in and standing out.”

So what is your take on native ads? Are the forecasts overstated or understated? What additional challenges might small businesses face beyond that discussed for brands?