Digital Media

Can Native Advertising Scale without Going Broke?

jpych-nextmark260 Native advertising is one of today’s fastest growing trends in digital media. Not a day passes without a bunch of news stories covering native advertising. Pew Research Center’s 2013 State of the News Media Report found that “though it remains small in dollars, the category’s growth rate is second only to that of video. Sponsorship ads rose 38.9%, to $1.56 billion; that followed a jump of 56.1% in 2011.” Whether the trend will continue on this fast growth rate is anyone’s guess. However, it’s clear that it’s a vital part of today’s media strategy.

Although its definition is ambiguous, Wikipedia defines native advertising as “an online advertising method in which the advertiser attempts to gain attention by providing content in the context of the user’s experience. Native ad formats match both the form and function of the user experience in which it is placed.” In its April NewFront, The Onion cheekily described its native advertising strategy as placing its editorial content and its sponsored content “side-by-side, with barely any distinction between them.”

Publishers are motivated to make native advertising work as they’ve struggled to transition from print to digital. “For every $16 that a newspaper is losing in print revenue, they’re gaining $1 in digital,” said Mark Jurkowitz, associate director of the Pew Research Center’s Project for Excellence in Journalism. Native advertising is seen as a promising new source of digital revenue for publishers. And one that is highly effective for advertisers.

Native advertising has its detractors, particularly among journalists. The New York Times has warned that it may be “journalism’s new peril.” However, a recent study by the Nieman Journalism Lab found that readers are indifferent to native advertising and these ads do not affect the credibility of a website. Supporters argue that native advertising is a more natural form of digital advertising than standard IAB ad units and holds the promise of disrupting the digital advertising ecosystem.

While some have made some early mistakes, such as The Atlantic’s native advertisement for the Church of Scientology, many other publishers are jumping into this trend. Buzzfeed, Gawker, CollegeHumor, and UpWorthy are examples of pure play digital publishers with sponsored content as a core part of their business models. Forbes led other major publishers with their BrandVoice product (formerly known as AdVoice). Many other publishers have followed suit with their own forms of native advertising, often called sponsored content, including The Washington Post, IDG, The Wall Street Journal, The Guardian and, more recently, The New Yorker.

It’s clear that major publishers are making a leap into native advertising, but are buyers operationally ready for native advertising? In other words, can it scale?

One problem is creating the advertisements. Unlike standard units such as the 728×90 leaderboard or 300×250 medium rectangle, you can’t run the same advertisement across many different sites. Each site will demand its own native format. The publisher may offer ad creation as part of the package, but that increases costs significantly and it can’t be used on other sites. Each placement is requires a one off advertisement.

The other problem is with media buying. Yesterday’s systems were not built to support digital, never mind native. They’ve been set up assuming typical ad units and pricing structures and lack the flexibility to handle native ads. So these deals have to be executed offline, adding to the cost.

While it’s clear that native advertising offers powerful benefits, it’s yet to be proven whether it can scale. Until creative production and media buying systems adapt to native advertising, it will be difficult to justify large media investments because of the high transactional costs involved in securing the inventory. Today’s agency operating systems, focused more on order management and billing capabilities, have yet to bring the type of planning and buying efficiencies necessary to lower transactional costs.

That’s where new workflow automation systems come in. Although much of the excitement in ad technology has been around the massive data and low-latency systems that power programmatic RTB, getting native deals done at scale requires neither “real time” capabilities nor bidding. A much more prosaic technology approach is what may ultimately make native ads successful: agency workflow automation systems. Built to automate the planning and securing of inventory, workflow automation systems scale a process that still continues to be mired in Excel spreadsheets and phone calls.

Although there are some “native” creative executions that will find scale in programmatic systems, the most impactful ads will be purpose-built for specific sites, and live on inventory that publishers are unlikely to release to the wilds of ad exchanges.

So, can native advertising scale? Only when agencies and marketers streamline the process of creating native advertisements and automate the workflow buying native advertising inventory.

 Joe Pych is a Makegood columnist and CEO of Bionic, a new division of NextMark, a company that provides tools for the media planning and buying industry. He also serves as Founder and President of NextMark. Joe recently spoke with The Makegood about his new system launch.

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  • Joseph F McCambley

    Nice article Joe. Especially helpful is your passage related to the value of workflow automation tools, and how they can help ease the strain of native experience creation and placement.