10 March 2017 ‘Democratisation’ of native advertising is one of the most exciting conversations for 2017

Three very powerful trends have been unfolding in the last years within this context, and they are fundamentally transforming the landscape. We call them:

• The new gatekeepers

• Problematic programmatic

• Native the only logical answer

The new gatekeepers

The first one is the rise of the platforms, especially the total market dominance of Facebook. Just a few years ago publishers had a monopoly on the distribution channels. While, in theory, anyone could fire up a blog engine and start running a publication, readers were mostly sticking to those at most two dozen or so websites they usually frequented.

With the rise of the platforms, publications lost the monopoly over content distribution and discovery. The real problems, however, started with the introduction of Instant Articles (and Google AMP), as they are slowly losing control over monetisation, too.

Facebook quickly became the gatekeeper of reader attention, and now they are on the way to becoming the gatekeeper of advertising dollars as well.

Problematic programmatic

The second trend is the rise of programmatic. Programmatic has fundamentally changed the way publishers make money. According to ZenithOptimedia programmatic will continue to grow at a breakneck speed. In 2016 it was $19.5 billion business, and it is expected to grow to $36.8 billion by 2019.

Last year more than two-thirds of digital display ad spending in the US was programmatic, and in Europe 95 per cent of the publishers have already deployed programmatic on their sites.

Programmatic, on the other hand, can quickly get problematic. Fraud is a grave concern. Almost 70 per cent of marketers think bot fraud is too high and 64 per cent are worried about the lack of transparency. Ad viewability is an issue, too, and IAB says there’s no technical solution in sight ensuring 100 per cent accuracy.

Finally, adblocking is still a concern. Not all programmatic is low quality of course, but some ads indeed have a severe impact on user experience; and it’s not surprising then that website visitors strike back by blocking them. Ad blocker penetration has flattened recently (varying between 10 and 25 per cent in different markets) and probably won’t be the death knell to the publishing industry, but it’s still a problem.

In short: Programmatic will get better over time and it will pay the bills for publishers – but not much more.

Native as the only logical answer

The third trend is the rise of native advertising. It is the publishers’ logical answer to what’s happening in the wider industry.

The platforms are eating the publishers’ cake, channelling away advertising dollars and pushing revenue sharing models. Programmatic is replacing traditional display advertising, but it’s not there as an all-round yet. Native is a tool for publishers to take back control by focusing on providing new, high-quality ad formats for advertisers.

Marketers love it: research from Sharethrough/IPG found that consumers looked at native ads 53 per cent more frequently than display ads, and 25 per cent more readers reportedly looked at in-feed native ad placements than display ad units. Native ads also registered 18 per cent higher lift in purchase intent and a 9 per cent lift for brand affinity.

Readers are more open to it, too, and 32 per cent of them would share a native ad with friends and family. This “shareability” is crucial considering peer recommendations are the most credible form of advertising. This is especially true for millennials: 89 per cent of them trust recommendations from friends and family more than claims by brands.

Native is effective because it respects the reader. It’s contextual, it’s not perceived as noise but as part of the content. It’s not intrusive, and when done well can be a very enjoyable experience for users. No wonder BI Intelligence forecasts that by 2021 native display ad revenue will make up 74 per cent of total US display ad revenue.

The dual strategy

For publishers need to pursue a dual strategy to stay on top of these three trends.

First, they need to work closely with Facebook and the other platforms. However, in the long term they can’t afford to build their whole business on the back ever changing platforms and their algorithms. The “frenemy” relationship can turn sour very quickly.

They should therefore work in a second direction as well, even more so than already in evidence today. From a revenue perspective, publishers should step up their native advertising game to provide a fun ad experience for users, and ultimately win ad dollars back.

Most large publishers already have in-house brand studios to serve brand advertisers, while some exciting niche publications like Roads & Kingdoms work exclusively in this model. (What this means for advertising agencies is a great question, but it’s a story for another day.)

These studios produce high-quality, carefully handcrafted native ad experiences, but this is a resource-intensive offering not all advertisers can afford. Democratising native for publishers and advertisers is one of the most exciting conversations in the industry for 2017.

Daniel will be at Digital Innovators’ Summit 2017 in Berlin, Germany (19-21 March), where he will share more thoughts on “democratisation” options available.

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