A M A R K E T E R ’ S

G U I D E T O

NATIVEADVERTISING

mdgadvertising.comSHARE THIS:

mdgadvertising.com 1

Introduction ............................................................................................................................................................................................... 2

What is native advertising? ................................................................................................................................................................... 3

Ways native advertising is currently used ....................................................................................................................................... 4

Making native advertising work for your brand ............................................................................................................................ 6

Content creation .......................................................................................................................................................................... 6

Native advertising placement ................................................................................................................................................ 7 Measuring native ad success ................................................................................................................................................. 8

A word about labeling and ethics ..................................................................................................................................................... 7

Why native advertising hasn’t grown even faster ........................................................................................................................ 9

The future of native advertising ........................................................................................................................................................ 10

Conclusion ................................................................................................................................................................................................... 11

Table of Contents

mdgadvertising.com 2

Seeking a more effective alternative to banner ads, marketers are looking for new ways to engage with a quickly growing online audience. Native advertising fills this need by providing a format generally preferred by Internet users. In-stream native ads also provide advertisers with seamless functioning across mobile and desktop platforms, complementing cross-device campaigns. Here, we’ll explore how this format differs from traditional advertising and learn how to develop, place, and measure the results of this rising star of online advertising.

In 2013, American adults underwent a major behavioral shift. For the first time ever, they spent more time in front of computer, smartphone, and tablet screens than they did in front of a television screen. In addition, easy access to smartphones and tablets has created a voracious appetite among consumers for content. These changes in behavior have driven marketers to take a long, hard look at how to best reach this increasingly attentive online audience.

With little evidence linking click-throughs to actual sales and a tendency toward banner blindness, traditional display ads have been losing traction in terms of delivering results. Frustrated advertisers are looking for new, more-effective ways to reach online consumers. This has set the stage for the rapid emergence of native advertising.

Introduction

mdgadvertising.com 3

Although definitions vary with little consensus, in its truest sense, native advertising is paid or user-generated content presented in the same format as the editorial content that surrounds it. In most cases, it is clearly marked as “sponsored by” or “brought to you by” the advertiser who paid for it. The traditional advertorial, which has been around for decades, is a common form of native advertising. Most consider the term native advertising to include content marketing, sponsored content, search advertising, content recommendations, and sponsored social media content. Currently, the most popular forms of native advertising are blog posts, articles, and social media-sponsored posts.

The common goal of native advertising is to engage consumers and increase the likelihood that they will click on content and then share it with others. Native advertising works because it’s less interruptive than display ads, which attempt to redirect a user’s attention away from the intended content. Since native ads fit in with the content users came to a site to enjoy, they are generally viewed as a welcome addition rather than as a distraction. Overall, it’s a win-win situation for everyone involved—a symbiotic relationship making consumers, publishers, brands, and advertisers happy. Advertisers and marketers gain a more-engaging way to reach their markets. Publishers make money from selling branded content to advertisers. And consumers get more of the kinds of content they’re looking for.

What is native advertising?

mdgadvertising.com 4

In general, native advertising falls into several different categories, with in-stream ads, sponsored content, and activity-triggered (ads triggered by consumer actions) being the most prevalent types. Here are some of the most popular forms of native advertising with tips to help you determine how each might fit into your overall marketing strategy: Search Advertising: One of the first and therefore more established forms of native advertising, search ads are served whenever an Internet user enters a search engine query that matches an advertiser’s corresponding keyword. These ads appear similar to organic search results. And, since they typically offer relevant information, consumers often click on them rather than the organic results offered by the search engine. Search ads tend to be particularly effective since they reach consumers at precisely the point when they are researching a purchase and ready to make a decision.

Sponsored Content: Sponsored, or branded content as it is sometimes referred to, is content created by advertisers that looks and feels like a site’s or publication’s own content. BuzzFeed was one of the first to capitalize on this type of content with posts that run in its main content stream. The only difference between the sponsored content and BuzzFeed’s own content is that the sponsored material is clearly designated with the sponsor’s logo or some other form of identification. On mobile devices, content is shaded to distinguish it from other posts. BuzzFeed even features the sponsored posts on its own archive page, complete with prompts that lead to the brand’s ad banner, or that encourage the viewer to “like” the brand on Facebook. Content Recommendations: Content recommendations, from companies like Taboola, are paid thumbnail displays appearing at the end of a site’s editorial content with links to “content you might also like.” Readers who follow the paid link will be led to content disguised as editorial that ultimately encourages them to click on a link to the sponsor’s website. The way to get an audience to respond is to match the paid content with editorial content of a similar nature. That way, the recommendations indeed lead to content the reader “might also like,” rather than something totally foreign to what the reader came to the site to read in the first place.

Ways native advertising is currently used

Search Advertising

Sponsored Content

Recommended Content

mdgadvertising.com 5

Sponsored Social Media Content: It’s estimated that by 2017, native advertising content will account for at least 40%—likely more—of the $10+ billion spent in social media. There are a number of reasons for this. For one, in-stream native ads give advertisers what they want—ads that function seamlessly across mobile and PC devices. Plus, Facebook has proven that in-stream ads have a 49-times higher click-through rate than ads placed in the right-rail sidebar, according to AdRoll analysis. Just as important, they deliver a 54% lower cost per click. Twitter and LinkedIn have also joined the rush to native advertising with promoted Tweets and Updates, respectively. Most likely, image- and video-sharing sites like Snapchat and Vine will soon follow suit. Pinterest has already begun testing its native ad offering with great success. Given that 43% of global Internet users have shared photos in the past month, these sites may, in fact, offer the most effective forms of native advertising yet, thanks to the visual nature of their content.

Blog Posts: Blog posts are one of the most popular forms of native advertising. An advertiser presents educational material on a particular subject, usually related to the product or service they hope to sell. For example, a blog post detailing “Seven Foods that Trigger Acne Outbreaks” might be presented by an acne medication that claims to help alleviate those outbreaks. This type of material positions the sponsor as an expert in the field with the goal of translating expertise into product sales. Articles: Similar to blog posts, articles present educational material related to a product or service in an editorial format. The only difference is that articles tend to be a bit more formal in style and are typically longer than blog posts. Printed advertorials are, in fact, one of the oldest forms of articles used as advertising. Again, the point of the article is to win the respect of readers and then translate this into sales. Content Marketing: The Content Marketing Institute defines content marketing as “a marketing technique of creating and distributing valuable, relevant and consistent content to attract and acquire a clearly defined audience – with the objective of driving profitable customer action.” In general, this is a broad term used to cover any type of content (written, images, video, etc.) created or curated for marketing purposes, whether it appears on the advertiser’s own website, one of their social media sites such as Facebook, Twitter, or LinkedIn, or on a third party publisher’s site such as The New York Times. When the content appears on a social media site or publisher’s site and is formatted to match the surrounding content, this content marketing technically falls under the realm of native advertising.

40%N A T I V E C O N T E N T

$10B SPENT ON SOCIAL MEDIA

It is likely that more than 40% of the total spent on social media will go to native advertising due to:

Facebook In-stream Native Ads49X click-through rate54% lower cost per click

Photo Sharing43% of global Internet users have shared photos in the past month.

mdgadvertising.com 6

With social media and mobile technology use steadily on the rise, native advertising’s potential is vast. So how can marketers make the most of this tool? Like all effective advertising, success hinges on creating the right content, placing it in the right environment, and then measuring whether it achieves the desired result. At the same time, none of these steps is approached in exactly the same way with native advertising as they would be with traditional advertising. Let’s start with content creation.

Content Creation

Any content created must meet the relevance and quality standards of the platform for which it is created. Otherwise, readers will quickly dismiss the material as unrelated to their needs. Appropriate content should echo the nature of the editorial content the audience expects from a particular site, app, or platform. In addition, most publications closely monitor sponsored content to ensure that it meets their established, and often rigid, quality standards. Rather than stand out from surrounding content, as traditional advertising strives to do, native advertising should complement the existing editorial while incorporating a much subtler sales message than traditional banner ads. As with most ad platforms, understanding the audience is essential to creating successful content. Advertisers have developed various approaches for researching and determining what types of content to provide. In general, it’s best to look at what types of content are trending with the audience you hope to reach. You can then determine which of those trending topics are most in keeping with the image the brand hopes to convey.

Making native advertising work for your brand

mdgadvertising.com 7

Native Advertising Placement There are a number of factors to consider in the placement of native advertising. Like any ad placement, much depends on the audience you hope to reach. For example, a professional who’s looking for business content would likely find content promoting a dating site more distracting than useful. In general, any publication or site suitable for a brand’s banner ads is a good contender for its native ads. It’s important, however, to verify where the networks actually place the native content. Just as in the early days of banner advertising, some networks have been less than transparent about this. Ask for a list of sites where your native ads will appear. For most advertisers, the issue is scaling. Because native ads must be tailored to fit their environment, they can be expensive to produce and place in a wide variety of publications and platforms. To solve this problem, a number of companies have sprung up claiming to make native ad distribution more efficient and cost effective.

Native ad networks: Most native ad networks take an existing creative product and adapt it to fit the look and feel of the pages where it will appear. For the most part, advertisers have very little control over which sites display their ads, what types of editorial content surround them, or in the final appearance of the ads themselves. Nor can they retarget a prospect who clicks on an ad. Some say these ad networks defeat the purpose of native advertising, which by nature should be customized to the tastes of each site’s specific audience. That argument aside, automation almost always requires advertisers to relinquish a great deal of control. Programmatic buying and real-time bidding: Programmatic buying allows advertisers to buy ad impressions based on preset parameters. Advertisers specify the type of audience they want to reach, and then an automated system matches these criteria to the users visiting a site. If there’s a match, the system serves them an ad. Real-time bidding (RTB) is a style of programmatic buying that allows buyers to purchase digital ad opportunities in real-time. RTB allows buyers to target prospects by demographics, location, and context. Used together, these two methods enable advertisers to deliver the right ad to the right audience at the right time. As a result, they provide a level of control, scale, and efficiency that was previously impossible to attain.

A word about labeling and ethics From a consumer standpoint, native advertising should always be clearly labeled as sponsored. Most consumers have no problem with native ads as long as they’re appropriately labeled as such. Without designations such as “sponsored by,” “brought to you by,” or “featured,” native ads can easily be confused with editorial content. So far, the majority of the complaints received by publications regarding native ads have resulted from a lack of clear labeling, proving that audiences respond negatively to content they perceive as misleading. In addition, the Federal Trade Commission is currently examining the use of native advertising to determine whether to issue guidelines regarding its use. So far, the commission has come to no conclusion on whether content should be labeled as created by or for an advertiser, what type of labeling language to use, or how native ads should be distinguished graphically from editorial. Advertisers will need to stay on the lookout for any new rulings as the FTC determines what, if any, new rules to institute. Lacking clear direction from the FTC, the Interactive Advertising Bureau (IAB) has released what it calls a native advertising “playbook,” outlining a framework for six different types of native ads. For now, the industry has responded to the IAB’s framework with mixed reviews. Although all parties are in agreement that some guidelines are necessary, no organization has yet to produce a winning formula that satisfies everyone.

mdgadvertising.com 8

44%B R A N D S

49%P U B L I S H E R S

Exchanges like Facebook’s FBX: Facebook’s FBX is a real-time bidding ad exchange that allows advertisers to drop cookies on users’ browsers as they surf the Internet. The users are later retargeted with related ads when they visit Facebook. For example, a user searching for hotel accommodations on Marriott’s site might later receive ads for the hotel chain on Facebook.

Combining display ads with native advertising: Not everyone agrees that native advertising will mark the end of display advertising. In many cases, the two work well together. Some publishers are using native advertising to sell packages that include display, video, and even live-event sponsorships. Forbes, for example, predicts that 30% of its revenue will come from ad packages in which its Brand Voice sponsored posts are just one element of a larger buy that includes more traditional promotional elements.

Measuring native ad success How native advertising results are measured tends to vary based on who does the measuring. In general, the success of native ad campaigns is measured in one of the following ways:

Story impressions—the number of times a story is viewed on the publisher’s site or in social media

The number of people who read the story

Time spent on the story, indicating engagement

Display ad impressions

The number of times a story is shared via social media

Brands and publishers tend to look to traffic and audience figures to judge the success of native ad campaigns, closely followed by social media sharing. Agencies’ brand clients are more likely to measure time spent engaging with content.

70%B R A N D S

66%P U B L I S H E R S

62%A G E N C I E S ’ B R A N D C L I E N T S

Measure social media sharing

Measure effectiveness via traffic data

Measure time spent engaging with content

mdgadvertising.com 9

Hope to increase

consumer engagement

Although native advertising has shown extraordinary growth in a relatively short period of time, there have been a few obstacles along the way. Pricing, for one. Without a firm consensus on the measurement of results, it’s been difficult to justify the current pricing of native ads. However, as more and more marketers are venturing into native advertising and additional results become available, more accurate pricing methods are emerging. Also, as mentioned earlier, there’s the issue of scale. Since advertisers have typically been concerned with the efficient delivery of ad units, native advertising—which must be customized to each publication or site—doesn’t fit neatly into the traditional efficiency equation. By their very nature, native ads are not designed to reach a mass audience. For this reason, it’s best to think of native advertising in terms of quality rather than quantity. Banner ads may deliver better numbers in terms of reach, but in terms of engagement and results, native advertising is the real winner. Creating “word of mouth” was cited by 48% of brands and marketers as their main reason for using native advertising. Sixty-two percent use native ads to generate awareness or buzz. Sixty-three percent hope to increase consumer engagement. And 67% use native ads to provide more relevant messaging.

In terms of performance, 52% of people who’ve clicked on native ads have purchase intent as compared to only 34% of those who click on banner ads. People who click on native ads also have higher brand favorability, with 32% of those clicking on native ads favoring a brand, as opposed to only 23% of those clicking on banner ads.

Why native advertising hasn’t grown even faster

Generate awareness

or buzz

Provide more-relevant

messaging

63%

67%

63%

Create word of mouth 48%

mdgadvertising.com 10

Once the initial drawbacks of pricing and scale have been surmounted, expect to see increased spending on native advertising by both brands and agencies. Already this year, native ad spending is expected to reach $7.9 billion. By 2018, spending on native advertising could hit $21 billion. Also, statistics show that 70% of Internet users want to learn about products through content versus traditional advertising. With agreement among all parties—agencies, advertisers, and publishers—regarding the efficacy of native advertising, an ecosystem supporting this format should quickly emerge. Already, three-quarters of publishers offer some type of native advertising on their sites, and 90% say they either have or will consider doing so. Buzzfeed, for example, has more than 700 advertisers taking advantage of its native ad units, and mobile ads now account for 53% of Facebook’s ad revenue.

Moving forward, native social media content will comprise the largest share of native advertising dollars. And as already seen, native mobile ads are expected to continue to outperform desktop placements. There is only one note of caution. A key factor to consumer acceptance, and therefore to the growth of native advertising, will be a commitment by all parties to maintaining transparency. An established system of best practices will be a key factor in earning the consumer’s trust.

The future of native advertising

70%

53% of Facebook’s ad revenue comes from native advertising.

of Internet users want to learn about products through content.

of publishers have done or considered native advertising.90%90%

mdgadvertising.com 11

The transition to native advertising requires a complete shift in the way we think about advertising and how we view its success. It’s no longer just about maximizing the cost-effectiveness of a single banner ad unit. It’s about developing customized content that, while more expensive to create initially, ultimately delivers a higher level of engagement and conversion rates. So while native advertising may cost more to produce, it typically delivers a more-efficient cost per impression. With its high consumer/brand engagement rates and new revenue sources for publishers, native advertising presents a huge opportunity for both marketers and publishers. Although many larger marketers have been quick to test and prove the effectiveness of native ads, smaller advertisers have so far been reluctant to experiment with their correspondingly smaller budgets. As a result, there is still a huge opportunity for those small to mid-sized advertisers willing to take the plunge. Those who do so are likely to gain a significant competitive advantage by being the first in their fields to venture into the lucrative native advertising foray.

Conclusion

Native advertising is a complete shift in the way we

think about advertising.

3500 NW Boca Raton Blvd. | Suite 601 | Boca Raton, FL 33431 | 561 338 7797 275 Madison Ave. | 14th Floor | New York, NY 10016 | 917 969 5370

Share this e-book!

If you would like to receive future MDG e-books, subscribe to the MDG blog, or contact MDG Advertising for a consultation on how native advertising can work for your brand, visit mdgadvertising.com or call 561 338 7797.

#StateofNativeAdvertising2014

6 Companies That Are Trying to Solve the Native Ad Scaling Issue

All Eyes on Native Advertising, Despite Uncertainties

Can Native Advertising Scale? These Networks Say It Can

Celebrity Sponsored Tweets: What Stars Get Paid For Advertising In 140 Characters (INFOGRAPHIC)

Digital Set to Surpass TV in Time Spent with US Media

Exploring the world through content-recommendation ads

Facebook Investor Relations

Facebook Officially A Mobile Ad Firm With 53% Of Ad Revenue Now Coming From Its 945M Mobile Users

FTC Giving Native Advertising a Closer Look

INFOGRAPHIC: Native Advertising Effectiveness Study by IPG Media Lab and Sharethrough

Inside Forbes: 10 Battlegrounds to Watch As Native Advertising Marches On

Marketers Stampede Into Native Advertising

Native Ad Workshop Leaves FTC Perplexed

Native Advertising Can Actually Boost Display–Ad Sales, Report Says

Spending on Native Advertising Is Soaring As Marketers And Digital Media Publishers Realize The Benefits

Survey Shows Twitter Users Find Ads On The Network Irrelevant, Random

The Emergence of Native Mobile Ads

The Rise of Native Advertising

What is ‘Native Advertising’?

What is Content Marketing?

What’s Next for Native Ads?

Why Native Advertising Is The Opposite of Porn

Why native advertising won’t suffer the fate of banner ads

Why Real-Time Bidding Is Going To Completely Change The Equation For Mobile Advertising

References