What’s the State of Native Advertising Now?

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For 160 years, Reuters has been the standard bearer in journalism and news publishing. Known for its objective and high-quality writing, a lot of readers and websites turn to Reuters for the latest news from the world of business, economics, politics and technology.

What if you discovered that the news wire service ventured into the world of native advertising, otherwise known as sponsored content? Would it change your level of confidence in Reuters?

Moving forward, Reuters will be helping marketers reach a greater audience with its Content Solutions division. Next to Reuters.com, marketers can submit their branded content across Media Express, an additional Reuters platform with 750 broadcaster and 1,000 newspaper clients.

Reuters insists that it maintains a strict separation between journalism and branded content. The newsroom has staff journalists, while the Content Solutions group hires freelance journalists. Moreover, unlike other media publishers, Reuters will utilize this type of content with a “Special Advertising Feature” as opposed to “sponsored content.” Consumers can read the drop-down box that confirms the specific content was produced independently from the newsroom.

Given the global stature Reuters has, the company had no other choice but to take advantage of this unique opportunity, says Daniel Mandell, managing director of Content Solutions.

The Numbers behind Native Advertising

Despite the growing number of ardent criticisms and bad reputation that native advertising has garnered – primarily thanks to the likes of HBO’s John Oliver and his scathing report of the latest trend – it still remains a popular movement for advertisers and brands.

By the year 2018, native advertising spending in the United States alone will have doubled from $4.3 billion today to $8.8 billion. Native advertising spending in Canada will top $200 million this year. This suggests that marketers are embracing this latest form of advertising to generate brand awareness.

One of the biggest adopters of native advertising is the B2B industry. Native ads create 82 percent more brand lift compared to regular banner ads, while purchase intent is higher by more than half with branded content.

B2B brands have started off with content marketing, which then provided a gateway into the world of sponsored content. American Express Open established Open Forum on the Huffington Post, a dedicated channel that allows brands and small businesses to post content.

The importance for native advertising among publishers and media buyers is vast, says two 2014 studies by Mixpo and Digital Media Review (DMR). A majority of publishers have already incorporated a native advertising platform into their business model or are planning to within the next year. Meanwhile, a majority of advertisers have already utilized branded content, and think they’ll improve moving forward.

Although the lucrativeness and ubiquity of native advertising is immense, it still represents only a fraction of overall marketing budgets. According to Association of National Advertisers (ANA), sponsored content efforts account for just five percent of budgets.

Why the Need for Native Advertising?

At a time when publishers are facing declining revenues because of ad-blocking software or a lack of interest in banner and panel ads, and when brands are facing a new generation of consumers, native advertising seems to have become the solution.

Simply put: publishers earn more funds to allocate into hard news stories; brands gain a bigger audience. Take a look at how a couple of websites make money from native advertising (courtesy of DigiDay):

  • Daily Mail (UK) charges brands $10,000 per post.
  • Huffington Post charges $40,000 per article.
  • BuzzFeed charges $100,000 for five listicles.
  • Forbes charges $50,000 to $70,000 per month.
  • Gawker charges up to $500,000 for a minimum of 12 individual pieces.

Now, consider this statistic (courtesy of Statistic Brain): the average standard banner ad click-through rate (CTR) is one to three percent and the average amount earned per click is between 20 and 30 cents. That’s a huge gap.

Since the famous Oliver report – he referred to the partnership between news and advertising as like raisins added to chocolate chips cookies or Twizzlers inserted into guacamole – it seems the native advertising industry is under a microscope.

Soon after HBO aired the piece, a number of ad industry executives commented on it.

One particular portion of the Oliver video that executives took exception with is the now botched 2013 sponsored content piece promoting the virtues of Scientology, which was published in The Atlantic. Dan Greenberg, the founder and chief executive officer of Sharethrough, told Bloomberg that the industry has learned a lot since then and it’s unfair to portray everyone as incompetent.

Greenberg alluded to the Interactive Advertising Bureau’s (IAB) Native Advertising Playbook.

This handbook provides a number of guidelines and standards to ensure high-quality native advertising. He did concede, however, that there will always be bad apples.

The advertising and publishing industries aren’t self-regulating anymore. The Federal Trade Commission announced earlier this month that it would be holding those who publish misleading native ads responsible.

Mary Engle, the FTC’s associate director of advertising practices, told attendees at the Clean Ads I/O conference in New York City earlier this month that the FTC is worried that what consumers view is advertising or not. Since its infancy, the FTC has refrained from holding publishers responsible for misleading ads because they were just distribution channels, but now they’re part of the creative process “and that creates some potential liability.”

Engle listed BuzzFeed, Gawker and Wired as just some examples of branded content creators. Despite this shift in directives, the FTC will only hone in on how advertising is displayed and labeled on their respective websites. In other words, “sponsored content” or “advertorial” won’t be acceptable anymore.

The FTC official clarified that it is not anti-native advertising. “Some people I’ve talked to [think] native is inherently deceptive,” Engle purported. “I don’t agree. I don’t think it’s inherently deceptive any more than an infomercial is inherently deceptive.”

In Canada, native advertising is beginning to be embraced. But there doesn’t seem to be any movement for regulatory oversight, or even self-regulating. Olive Media and the Globe and Mail are currently the major Canadians players in the realm of branded content.

Previous surveys and research indicate that the FTC may actually have a case.

A survey by the Reuters Institute for the Study of Journalism released this month found that 43 percent of U.S. readers reported being deceived or disappointed by native ads. That number fell to 33 percent among British readers. There were two important findings in the study: a majority of respondents didn’t appreciate brands and publishers producing sponsored content and young people are more forgiving of this practice (hence the popularity of BuzzFeed).

Final Thoughts

If the facts and figures regarding native advertising are true then this newest marketing method is here to stay, at least for several years.

Indeed, there is a bit of pushback from native advertising. Perhaps because there have been some hiccups. However, native advertising will likely evolve and improve with time. Today’s current situation is akin to the New York Times in the 1970s when it published ads for Mobil Oil on the op-ed page. It separated journalistic integrity and paid advertising.

Advertisers, brands and publishers will have to collude and improve this system. Whether it’s greater objectivity or heightened scrutiny over the brands’ messages, something has to give. If the industry refuses get better over time then consumers will just tune out, and this newest ad wave will come crashing down.

Both the brand and the publisher will lose credibility if native advertising has a gold standard.

Photo credit 10ch via Flicker.

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Andrew Moran

Andrew Moran is a full-time professional writer and journalist, who covers the areas of business, economics and personal finance. He has contributed to Benzinga, Capital Liberty News, Career Addict, Money Morning and PFHub.
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