Scaling Native Advertising

How will native advertising scale?

That’s the question on the mind of every brand advertiser, ad agency, and publisher.

Native advertising has emerged as a great hope for the future of advertising, to capture the billions of brand ad dollars expected to shift from TV, where mass audiences are finally collapsing, and from online display advertising, where already rock bottom prices, consumer attention, and effectiveness continue to plummet.  Native advertising is also a great hope for monetizing mobile, where display ads aren’t just dying but DOA and digital dimes have turned into pennies at best.

The hope for native advertising is based on its potential to create immense value for everyone involved:

Value for Consumers

At its best, native advertising gives consumers content that is genuinely interesting, engaging, and useful.  As BuzzFeed has pioneered, the best native ad content can be so engaging that consumers share it with their friends.

Native advertising is a stark contrast to the interruptive advertising model and to display ads that are so uninteresting, useless, and value destroying that “banner blindness” is now universal.

Native advertising truly is NATIVE when consumers can value the content the same way they value editorial content.

Value for Brands

Brands buy display ads because they know they have to follow consumers online, but they have always been skeptical of the value for branding (e.g. advertiser obsession with clicks when the campaign goal is supposed to be branding).

Brands want to be the center of attention, to command consumer engagement. Brands don’t want to be stuck in the sidebar.  And even when the display ad takes over the page, smart brands know that this kind of hostile action doesn’t create positive brand associations.

Pissing off consumers is not how you build brands.

Native advertising enables brands to effectively leverage the consumer attention that publishers still command, with content that can engage those consumers as much as (or, holy grail, even more than) the publisher’s own editorial content.  That’s the kind of value-creating engagement that builds brands.

Value for Publishers

Native advertising gives publishers a golden opportunity to correct the true “original sin” of online publishing — display advertising.

Native advertising has such huge potential for publishers precisely because, unlike display advertising, it can create real value for consumers and advertisers.  When value is aligned for consumers and advertisers, publishers win.

But native advertising can also enable publishers to overcome the most destructive aspect of online display advertising, which is that display ad networks can target a publisher’s premium audience via cookies when that audience goes elsewhere (i.e. when they visit less expensive sites).  The Atlantic’s Alexis Madrigal explored this problem in great depth, and sums it up like this:

“Now you can buy the audience without the publication.”

With native advertising, the value shifts back to the publication itself, to the premium native context that publishers create and which can’t be reproduced and sold at lower cost elsewhere.  Native ad content can only be native to a publication, and get the lift from the publisher’s brand, on the publisher’s own site.

Native advertising could also solve the huge problem publishers have with mobile, which is that they would go out of business tomorrow if their audience went 100% mobile, due to the abjectly poor monetization.  Twitter’s native ad format, Promoted Tweets, has shown exceptional performance in mobile. Native ads in mobile could be the perfect alignment of value for consumers, brands, and publisher.

For newspapers, there’s an additional opportunity — run native ads in print. Magazines have been doing it for years with advertorials and have made it kosher with proper labeling. Newspapers can’t afford to overlook an opportunity to generate more revenue from print, given the fixed cost, if it can be done in a way that creates real value for consumers.

So much potential, and yet…

To be valuable to brand advertisers, native advertising must SCALE.  Brand advertising needs reach, and without scale, there’s no reach.

Native advertising faces two huge barriers to scale:

1. Scaling Content Creation

Madison Avenue is structured to produce “creative”, not content in the editorial sense, which is required for native advertising to be effective.

BuzzFeed is at the forefront of creating a scalable model for native ad content creation. They aren’t just creating content for brands that is similar to their editorial content — it’s literally the same.  That’s what makes it truly NATIVE.

The BuzzFeed team that creates native ad content for advertisers is not some watered down version of the editorial team appended to some marketing department.  It’s fully equivalent.  They create content that is indistinguishable from BuzzFeed’s editorial content in terms of quality, consumer engagement and social distribution.  It just happens to be paid for by a brand.

BuzzFeed CEO Jonah Paretti is the first to admit that creating great content that will actually engage consumers does not scale in the traditional Silicon Valley sense.  But BuzzFeed is taking a fundamentally human process and optimizing it for scale. One key is training agencies to use BuzzFeed’s content creation platform, which could transform agencies into a scalable network of native ad content creators.

Who Employs the Ad Content Creators?

The irony is that the advantage in scaling native ad content creation will go to whoever employs the most journalists.   PR firms are very well positioned — they have been hiring journalists for years. They could pivot their niche digital content and microsite business into scalable content machines.

Of course, news organizations are arguably best positioned. Instead of laying off journalists and sending them to off to PR firms, they could re-employ them to create native ad content.  Dallas Morning News, for example, created Speakeasy, a joint venture with a local agency, that creates content for local businesses, which could be used to scale native advertising for local.  Forbes hired a team of writers and editors to help brands produce content for their BrandVoice native ad platform.

The advantage will likely go to whoever can combine the best content creators with the best content creation platform technology.

2. Scaling Content Distribution

The second barrier to native advertising scale is distribution — achieving the “reach” that  brand advertising demands.  No individual publisher will be able to deliver this kind of reach alone.  That’s why BuzzFeed is building a native ad network. It’s why Google launched AdSense once they perfected AdWords on their own property. Given the inherent fragmentation of the web, you need a network to scale distribution.

As Buzzfeed President Jon Steinberg explains it:

“We always wanted the business not to be limited by the scale of our site,” Mr. Steinberg said. “That means figuring out places to what we do other than on Buzzfeed.com.”

Algorithms are Too Risky

Everyone is assuming that native advertising will scale distribution the same way that search and display advertising did — through algorithms and automation.  But native ads can’t scale that way because of the risk of damaging both the advertiser’s and publisher’s brand is so high.

The brank risk for advertisers can be overcome to some degree by giving them control over which publications their ads appear in.  Since a native ad is the primary content on a page, inappropriate content adjacency is not as significant a concern.  If brands have a feed of content (e.g. from a blog), they will also need to control what content is made available as a native ad, since all content in a given feed might not be appropriate.

The brand risk for publishers, however, is much more difficult to overcome.  After the Scientology debacle, which has become a cautionary tale for the risk that native advertising poses to publishers, The Atlantic said that “native ads will go through a two-part review.” This was a rational response, given the need to protect their high value brand.

But such a review process is a huge barrier to scale.

Existing Display Ad Tech Won’t Work

And that’s why existing ad tech won’t work for native advertising.  Ad tech designed to scale based on semantic targeting and automated placements would create huge brand risk.  There’s a lot more at risk when a poorly targeted ad appears in the main content stream than when it appears off to the side where consumers ignore it anyway.

For example, a Pepsi-sponsored video of Beyonce’s new dance routine, while high quality and valuable content, is not a brand fit with BoingBoing.  Cleaning tips from Cottonelle is not a brand fit with a business news site.

What makes ad content “native” is much more than just making it appear like editorial content on a site — that’s just a superficial styling trick, which is commodity technology.  What makes the ad native is how well the topic, voice, and substance fit with the publisher’s brand, so that it flows with the editorial content, not sticks out like a sore thumb.  To achieve that kind of brand fit and relevancy requires human editorial judgment.

Native Ad Platform Must Scale Editorial Judgement

To scale distribution, native advertising needs an ad platform that can scale human editorial judgement and provide an efficient interface for publishers and brands to control the flow of native ad content.

Brands need to be able to choose the publications and curate content best suited to appear natively on those sites.

Publishers, then, need to be able to curate the native ad content available from those advertisers. Publishers need to apply editorial standards, which only human judgment can do, and optimize content selection for relevance and brand fit.  A native ad platform needs to enable publishers and editors to do what they do best — create the best content package for consumers.

That’s the kind of deep content integration, beyond superficial styling, that native advertising needs to succeed and create real value at scale, and an algorithm can’t do it. But technology-enabled editors can do it, at scale.

A native ad platform could achieve even greater scale through network effects, by sharing editorial judgment across the network.  Brands should be able to see which publishers and editors are publishing their content, and publishers should be able to share judgments about which native ad content is highest quality and most trustworthy.   Platforms ranging from Digg to Twitter have shown that network effects are the key to scaling editorial judgment.

Google’s AdWords/AdSense brilliantly combined relevancy, as determined principally by an ad’s clickthrough rate, with the cost-per-click bid.  A native ad platform needs to similarly combine  human quality judgment with a cost bid to create a liquid marketplace.

Native Ad Platform Must Be a CONTENT Platform

Lastly, a scalable native ad platform needs to be designed to handle content.  Native ad content needs to be optimized so that it appears native in each publication, to give advertiser the full brand lift of the publication’s brand.

A truly native advertising network can’t be a “link economy,” it needs to optimize the user experience by publishing the brand’s content directly into the publication, natively, right alongside the publication’s editorial content. Especially in mobile, it’s a essential to create a continuous content experience that seamlessly combines editorial and native ad content, without bouncing users out of the app or responsive site. Quartz has done a great job creating that kind of optimized mobile experience for native ads. On the other end of the platform spectrum, imagine flowing native ad content into a print editorial system.

But all that heavy duty content optimization and integrated publishing is not what display ad tech was designed to do. A platform for native advertising must be, at its core, a content platform.

AdWords + AdSense Equivalent for Native Ads

It’s instructive to remember that Google actually copied the pay-per-click search advertising model from Overture, but Google ultimately won because they first achieved scale for AdWords on their own search property. This gave them a pivotal advantage over Overture’s pure ad network model, because Google grew a much larger base of advertisers and ads via AdWords, which they were able to scale across the AdSense network.

Publishers like BuzzFeed, Forbes, Quartz, and Yahoo have the advantage of using their own sites to perfect their content creation platforms for native advertising.  Whoever perfects that native advertising equivalent of AdWords will then need the platform equivalent of Applied Semantics, the company Google acquired to create AdSense.  The Applied Semantics of native advertising will be the platform that makes editorial judgment scalable for distribution.

Success in native advertising will be about technology-enabling human editorial work, on both the supply side and the demand side, at network scale.

The allocation of ad budgets to native advertising will likely be dramatic and disruptive. The question is, when the money flows, which content creation and distribution platforms for native advertising can scale to capture those dollars?