OUR PERSPECTIVE ON. Our perspective on Native Advertising NATIVE ADVERTISING

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1 OUR PERSPECTIVE ON Our perspective on Native Advertising NATIVE ADVERTISING

2 MerchantCantos Introduction Hyped as one of 2014 s biggest media trends, native advertising is paid for content using advertising formats. Ad units are distributed throughout editorial content by the publisher and seek to engage audiences by relaying content relevant to the editorial. It is not intended to trick the readers into thinking the ad s a part of the advertorial, but it seeks to blend ads and editorial seamlessly. Native advertising has been dubbed the media business s latest obsession. And viewed in the context of the declining effectiveness of online display advertising, it s not hard to see why. Clickthrough rates for online native adverts are much higher than traditional online advertising. According to native advertising ad platform, ShareThrough, consumers looked at native ads 52% more frequently than display ads. Many brands see native advertising as an opportunity to create content that readers are more likely to engage with than traditional online advertising, which explains why projected spend is increasing. A recent emarketer report forecasts marketers will spend $4.3 billion on native advertising in 2015, a 34 percent increase from The figure is expected to double to reach $8.8 billion by Native advertising falls under the content marketing banner and varies according to company, platform and channel used. But it is content that is automated, matched to the editorial content, and it is typically labelled as promotional or sponsored content within the ad unit. It doesn t only appear on news publishing sites, it can appear on social networks in several different guises, including: promoted Tweets, trends and people. promoted stories promoted posts 4.3 $billion Source: emarketer forecast spend on native advertising in 2015 What does it mean to the industry? The arrival of native advertising is changing the relationship between brands, agencies and publishers. With publishers setting up their own divisions to create branded content, some traditional advertising agencies are potentially being taken out of the equation when it comes to advertising in the traditional print media. How is native advertising different to content marketing and advertorials? The definition of native advertising is contested but it can be defined as paid for content that closely integrates with the medium where it s appearing. It must be clearly labelled as originating from the advertiser as it is illegal for any form of advertising to not maintain transparency. Native advertisements align with the publication or site s established editorial style and tone, and also provides the kind of information that the publication s audience typically expects. These qualities are what make native advertisements difficult to spot, as they often blend in with the organic content extremely well.

3 Our perspective on Native Advertising US social media ad spending, by type, $billion $6.40 $5.70 $5.00 $4.57 $4.30 $3.98 $3.70 $3.40 $3.00 $2.85 $2.36 $ Note: includes desktop and mobile platforms and local and national spending; excludes social marketing/measurement platforms and services, social commerce and virtual currency; * branded content integrated directly within a social network experience Source: BIA/Kelsey, Annual US Local Media Forecast: Social Local Media , April 10, 2013 Display spending Native * spending Native advertising in numbers Consumers looked at native ads 52% more frequently than display ads. 25% more consumers were measured to look at in-feed native ad placements (the most common editorial native ad format) than display ad units. Source: ShareThrough Native ads registered 18% higher lift in purchase intent and 9% lift for brand affinity responses than banner ads 32% of respondents said the native ad is an ad I would share with a friend or family member versus just 19% for display ads.

4 MerchantCantos? Who is getting involved? Publishers, brands, agencies and an increasing number of startups have seized upon the opportunities presented by native advertising and content marketing more generally. In the face of declining digital revenues, publishers have jumped at the opportunity to get on board. Publishers are setting up agencies to rival the advertising agencies. BuzzFeed makes the channel, the content, and the ads. Who are the players in the native advertising space? The marketplace is a mishmash of: Advertising/digital marketing agencies (e.g. Beeby Clark+Meyler) Publishers (such as BuzzFeed and the New York Times) Social networking sites (such as Twitter and Facebook) Brands (such as General Electric and SAP) Ad tech providers (such as ShareThrough and Outbrain) Which publishers are involved? The US Federal Trade Commission notes that 73 percent of online publishers currently offer native advertising opportunities. Online publishers from BuzzFeed, Upworthy and Yahoo to the New York Times and the Wall Street Journal are offering native advertising to clients. 100 percent of BuzzFeed s revenue comes from branded content. Already, most of BuzzFeed s revenue is derived from BuzzFeed Creative, the company s 75-person unit dedicated to creating for brands custom video and list-style advertising content that looks similar to its own editorial content. Forbes has a brand newsroom. The Wall Street Journal has WSJ Custom Studios, its native advertising division. The New York Times has T Brand studio, its native advertising unit. The Guardian has Guardian Labs, a branded content and innovation agency. Time Inc has just started a native advertising bureau. 73% of online publishers currently offer native advertising opportunities Source: US FTC

5 Our perspective on Native Advertising Which brands are doing it? Corporate titans such as Ford, HP, Kimberly- Clark and General Electric have all dabbled in native advertising in General Electric sponsored 10 Lifechanging Ways To Make Your Day More Efficient (by GE) in BuzzFeed. Chevron partnered with The Atlantic. Dennis Publishing has launched a range of native advertising placements with brands including Barclays, HP and Castrol. Diageo is partnering with The Guardian s branded content division to create and host ads based on the publisher s most popular lifestyle articles. Have there been success stories? The New York Times has succeeded with a series of attention-grabbing sponsored posts. Using both native ad-units and traditional online banner ads on the homepage they drove people to the url paidpost.nytimes.com, where they found arguably its most famous narrative article on women s prisons for Netflix s Orange is the New Black. The article was illustrated and accompanied by audio clips, a slideshow and graphics. It was also widely read: the campaign got more than 145,000 impressions, according to Nudge. Beeby Clark+Meyler led a native advertising campaign for GE which reached 5.1 million people and resulted in 416,000 clickthroughs and a clickthrough rate of over 8 percent. Where do the traditional advertising agencies stand in relation to native advertising? Native advertising currently accounts for 9.2 percent of the total digital display spend by UK agencies, but that figure is estimated to reach 15 percent by 2015, according to a report by Far Partners. The 17 percent of agencies that don t yet incorporate native advertising into their media plans, stated that they are planning to do so. Is this a threat to advertising agencies? Yes & No Traditional publishers don t always have to be involved. There are still plenty of opportunities from native social adverts. Moreover, even where the client is hiring someone from a brand newsroom, they may still choose an agency to handle that relationship with the publisher. Are there opportunities for B2B? Absolutely. Forbes sponsored content programme for German software company SAP drove 300,000 page views from five sponsored articles. Then there are the distribution options, which allow B2B clients to craft highly targeted campaigns. LinkedIn is now the most popular social distribution channel among B2B marketers and it enables businesses to promote sponsored content, including text, video and presentations.

6 MerchantCantos And what about the controversy? Native advertising has generated controversy at some prestigious newspapers. The principle of the separation of church and state has governed the editorial practices at newspapers since the dawn of newspaper printing. Simply put, journalists wrote editorial and advertisers paid for adverts. And it was relatively obvious to readers what was promotional and what wasn t. It is also worth noting that ambiguity can also have a knock-on effect for the audience relations with the brand. Evidence shows that people s trust can reduce if the origin of the content is unclear. But arguably, there has always been a grey area where promotional content is concerned. Paid for advertorials, which are written in a publication s house style and are designed to bridge the gap between an advert and an article, have been gradually undermining the distinction for many decades. Expect to see more opportunities on mobiles What are the opportunities for native advertising? The real opportunity comes in producing rich creative engaging content that will be popular with a publication s audience. Native advertising presents an opportunity for innovative digital storytelling. Expect to see more opportunities on mobiles as well, as mobile native advertising takes off. Facebook s sponsored posts have already proven to be effective on mobiles and expect more app makers to jump on the bandwagon. Dating app Tinder announced it was poised to introduce native advertising on a recent earnings call. Twitter s senior management also clearly sees potential. It recently acquired Namo Media, a company that offers native advertising for mobile apps. Conclusion This format is still developing and with it is the ecosystem. As it continues to evolve it presents opportunities for creative storytelling by combining strong editorial nous with the latest digital storytelling techniques, but only if there is trust for the brand, no sales pitch and very clear transparency over where the content is from.

7 Our perspective on Native Advertising Appendix Who else is in the game? There are a host of new platforms offering specialist services relating to native advertisers. StumbleUpon offers a full-page native advertising network for brands and publishers. Reach the right audience with targeted content distribution. Tan Media Polar native advertising platform. Infinigraph content amplification. Outbrain ad platform. Appsfire mobile native advertising. Respondhq the native advertising platform. Stay & Wander a digital agency specialising in influencer led native advertising. ThoughtLeader build the most powerful native advertising platform on the planet. The Amplify data driven native advertising on Instagram. Nativo the native advertising platform. Revenue.com a native advertising tech that helps brands amplify the reach of their content via in stream ads. PowerLinks Media complete native advertising platform connecting buyers and sellers of native advertising Bidtellect Woobi specialises in the development of custom, scalable, native advertising solutions for web, social and mobile games. Pianoadv native advertising and blogger management agency, we tweet quality content to benefit business and self. Native mobile ShareThrough produces technology that breaks down an ad to make it fit the look and feel of the page. ShareThrough churns out multiple versions of the creative and has the ability to update the headlines and images in real time. Polar whose native ad platform is used by The Huffington Post, Condé Nast, Bloomberg and others, packaged up a set of benchmarks that show how the format is performing on mobile, tablet and desktop. Polar found that native ads do better on mobile than on desktop, where native ads have to compete with so many other elements for attention. Nativo optimises ads in real time, across devices, in the content stream, and unlike other native ad platforms, readers stay on the publisher s site after they click an ad.

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