With native advertising rising sharply in the revenue mix, media companies are expecting even bigger things in the next three years. On Wednesday, INMA conducted a live, in-depth Webinar with Jesper Laursen, founder of Native Advertising Institute, to allow members to learn more about where native advertising is going next.
Sharing information gleaned through a survey of 231 media executives from 51 countries from the Native Advertising Institute (on which Lauren based an INMA strategic report on the same subject), Laursen answered questions such as:
- Why are advertising agencies fretting the rise of native for publishers?
- Why are publishers still struggling with labeling?
- What are the opportunities and threats to this vital revenue source?
“It’s important to realise that if we look at this globally, it’s a very big market,” Laursen began. “While native advertising (NA) might already be big in the United States and other countries, some countries are just getting started.”
Laursen shared information learned from Native Advertising Institute’s recent survey of media executives. He and INMA did a similar survey in 2016, as well. Part of the presentation compared those previous numbers with the ones revealed in this new survey.
How likely are you to use native advertising as an advertising or service option?
- Not likely: 2%
- Less likely: 6%
- Likely: 25%
- Most likely: 16%
- We already do: 51%
Laursen noted that the last answer — 51% of respondents saying they already use native advertising — compares to 48% reported the year before.
“We also asked them how they feel about native advertising,” he said. “This is an interesting question, because we have both commercial and editorial sides of the business; 82% said they felt positive, compared to 76% the year before. Both sides [commercial and editorial] are getting more and more positive toward native advertising, with less pushback.”
The survey also asked how important NA is to respondents’ companies: 50% rated it as very important, compared to 35% the year before.
“We asked how you price native advertising compared to traditional advertising,” Laursen said. “We saw that on a consistent basis, publishers are charging more for their native advertising than for traditional advertising (65%).”
The survey also found that in 2016, the native advertising share of total ad revenue was 18%, compared to 11% the year before. “Our prediction for 2020 is that it will be 32%. There is a big difference between publishers; some are already getting more than 50% of advertising revenue from NA, even building their entire advertising strategy around it.”
In addition to news media companies, advertisers were also surveyed about their total marketing budget. In 2015, 10% of the budget was reported spent on native advertising. That doubled to 20% in 2017, and is expected to climb to 29% by 2020.
“We can use that to say that it’s not just wishful thinking on the side of the publishers; it’s something that brands and advertisers are using as well.”
The big opportunity
“I truly believe that this is the biggest opportunity for publishers right now,” Laursen said. “The obvious opportunity is that native advertising can be part of replacing the gap in declining ad budgets. But we’re also seeing more and more publishers jumping in and actually producing native advertising campaigns themselves, and getting that revenue.”
As they get more and more advanced, some publishers are expanding their offerings to cover areas that used to belong to other agencies, Lauren said: “They are almost declaring war on advertising and media agencies. The publishers are acting as media agencies themselves. That’s a very interested new trend.”
Today, 35% of publishers are actually building their own native advertising studio, the survey shows. “This is no easy task," Laursen cautioned. “If you want to get into this game, you have to start acting as an agency. Though it has big potential, it’s a new way of operating — and not necessarily an easy one.
“If you as a publisher are determined to pursue this opportunity, you need to bear in mind that there will be a lot of work. It’s crucial to not underestimate the level of work and the core competencies that you’ll need to acquire.”
Other methods for implementing native advertising include using a separate native ad team (28%) and using an external agency partner (13%).
“One very interesting response is that 47% use their editorial team to provide native advertising solutions. The same journalists that report on news are being provided to create editorial for native advertising. The magazines are doing that a little more than newspapers.”
A point was made by INMA Executive Director/CEO Earl J. Wilkinson that a publisher like The New York Times would never involve their journalists in native advertising editorial, while a small local newspaper would likely do this more. This needs to be kept in mind when looking at global results.
“We are seeing no correlation in terms of size; it’s more a correlation with how stressed they are on budgets,” Laursen responded. “It very often times comes down to what they feel is necessary to survive.”
Greatest strengths in native advertising
When asked what their greatest strengths were when it comes to native advertising, the responses were:
- Multi-platform storytelling: 54%
- Single-platform storytelling: 18%
- Existing brands and audience relationships: 62%
- General editorial experience: 58%
- Knowledge about audience preference and behaviours: 47%
- Documented native advertising results: 24%
- A specialised staff for producing native advertising: 40%
- A native advertising studio: 19%
- Audience data: 29%
Addressing multi-platform storytelling, Laursen said news publishers are moving away from home, so to speak, and spreading their campaigns across platforms.
It’s not all positive, obviously. When asked what respondents considered the biggest threat to succeeding in native advertising, the most common response was poor client understanding (44%).
“We are seeing many publishers doing great work in educating the market on the benefits of native advertising,” Laursen said. “A new thing this year is native advertising risks being associated with fake news; 37% cited this as a challenge.”
Poor labeling was also a main challenge listed. When asked how native advertising was labeled, the most alarming piece of data to Laursen was that 11% of newspaper publishers around the globe were saying that they don’t label at all. This number has grown from previous years. Interestingly, with magazine publishers it is going the other way; they are labeling more, not less.
“Not getting caught is not the same as it being OK,” Laursen said. “Newspapers in particular have struggled for decades or even centuries building their credibility. You can lose that in days if you do something that will cheat your audience.
“When we talk off record to the publishers, they feel the need to sell this content to their audience, and they fear that by labeling it as native advertising they will lose that. But audiences react positively to native advertising in general, they like it if it’s engaging and relevant. You don’t want your customers to feel cheated in this way.”
INMA: On the topic of using ShareThrough to distribute native ads away from own and operated properties, what percentage of publishers have actually built media buying operations? It seems that this would increase margins by owing the entire value chain: creative, media buying, distribution.
Laursen: We haven’t seen any publishers creating entire departments around this. The ecosystem around agencies of any sort are really changing at the moment. Most publishers are just getting started in native advertising, let alone the media buying of it. All the signs tell us publishers will be engaging in it.
INMA: How is the distribution of multi-platform campaigns versus only digital or print?
Laursen: When we really dig into the NA awards submissions, we see that the campaigns running on single platforms are not performing as well as those run on multiple platforms. Obviously it is more complex, but the effects are generally higher.
INMA: How can you use native ads as a publisher and make profit, when your business model is user registration behind a paywall?
Laursen: If it’s a no-ad scene behind a paywall, native advertising will be difficult. We’re seeing that it’s really not about numbers, but the quality of your audience and their engagement. We’re looking at ROE — return on engagement.
INMA: What are the main KPIs brands have for the success of native advertising campaigns? And are publishers differentiating their native advertising products based on different sets of KPIs (i.e. brand health vs engagement)?
Laursen: To get the big campaign budgets and renewals, publishers need to be able to speak the language of the advertisers, and realise that they need to deliver on the same KPIs. An advertiser doesn’t really care about how many people look at it; she cares about leads and sales.
INMA: Is there a difference in acceptance and impact of native ads on print vs digital platforms? Do audiences respond better to one or the other? If so, do you have stats for that?
Laursen: I don’t have any stats. As we all know, measuring the effectiveness of print is usually much more difficult than it is online. We are seeing that the percentage that print has out of native advertising is not declining as much as we were expecting. We’re actually seeing that print is doing pretty well in getting the budgets for native advertising. But we don’t have audience reaction stats so much.
INMA: What are some places with best practices?
Laursen: Scandinavia and Croatia. You cannot overlook The New York Times and the success they’ve had. We are seeing great work in every corner of the world. Real-time native advertising is really going to pick up. The ability to jump on something right now is powerful.
INMA: Can you give us some insight into these conversations inside the advertising world?
Laursen: Agencies are afraid that publishers are taking over, and they will not be able to compete. Normal advertising agencies don’t have the same storytelling capabilities that journalists do.
From an advertiser perspective, there are two reasons to go into native advertising: One, they feel that traditional advertising isn’t as effective and doesn’t engage the prospects the same way. The other half of it is brands moving in from content marketing backgrounds — a brand being a publisher themselves, building content and an audience themselves.
INMA: What’s the No. 1 thing that publishers are not doing enough of?
Laursen: They can improve by expanding their offerings. One way is to go into strategy; it’s an opportunity for publishers to go in and be part of those strategic conversations. They are also getting better at data, because they have to know this information for their own audiences. This makes them a very powerful partner for advertisers.
“It’s not easy,” Laursen concluded, “but when you succeed, that’s the holy grail.”