Pricing Native Advertising

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Gloria Mason
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1 The Local Media & Advertising Experts Pricing Native Advertising Rick Ducey Managing Director BIA/Kelsey Topics Native ad ecosystem Forecast and drivers Does native advertising work? Pricing metrics and strategies Case study Recommendations 2 1

Native ad ecosystem Forecast and drivers Does native

2 Native Ad Ecosystem Has Many Players Trying to Earn a Living 3 Where do native ads occur? Social networks. Facebook s News Feed ads, YouTube s Promoted Videos and Twitter s Promoted Tweets are among the most popular formats, but others such as Pinterest, LinkedIn, Google+ and StumbleUpon are ramping up in this area. Mobile. A key driver behind the success of native advertising has been the growth of mobile usage on platforms such as Facebook, Twitter and Pandora. Digital media. Native implementations include BuzzFeed lists, sponsored articles on Mashable and The Huffington Post, videos on CollegeHumor and real estate listings on Trulia.com. Traditional media. Publishers with active native ad programs include The New York Times, The Atlantic, Hearst, The Guardian and Vanity Fair. 4 2

in this area. Mobile. A key driver behind the success of native advertising has been the growth of mobile usage on platforms such as Facebook, Twitter and Pandora. Digital media.

3 Social Native Advertising Growing to $9.4B by 2018 Source: BIA/Kelsey,

4 Native advertising is #2 most important digital revenue source 7 8 4

5 9 10 5

6 So does native advertising work? ROI from Native Platforms ROI Assessment of Media Used For Advertising (1 of 2) Excellent 10-19x Spend Extraordinary Over 20x Spend 50% 40% 30% 26.1% 20% 15.8% 13.3% 18.6% 11.9% 12.8% 12.2% 12.3% 12.1% 10.9% 13.3% 11.3% 7.7% 10% 18.8% 19.3% 20.0% 13.6% 20.2% 18.9% 19.5% 18.8% 18.8% 17.8% 13.3% 12.6% 13.2% 0% Source: BIA/Kelsey Local Commerce Monitor, Wave 17, Q3/2013 (and prior waves, if relevant). Methodology: Online panels. Q

Over 20x Spend 50% 40% 30% 26.1% 20% 15.8% 13.3% 18.6% 11.9% 12.8% 12.2% 12.3% 12.1% 10.9% 13.3% 11.3% 7.7% 10% 18.

7 You are times more likely to survive a plane crash than click on a banner ad. -SolveMedia % of users say they are more likely to look at a native than a banner ad

than click on a banner ad. -SolveMedia 13.

8 32% would share a native ad. 18% more (52% vs 34%) of native ad viewers show purchase intent Pricing Factors 1. Campaign goal branding, direct response have different metrics and value points 2. Content type SMS, video, text 3. Channel desktop, mobile, tablet 4. Programmatic platform vs direct selling 5. Packaging and bundling increase AVO (average value of order) 6. Competitive pricing market factors, easier to manage with bundling 7. Value pricing easier to achieve with bundling 8. Cost-based pricing difficult to fully attribute costs, but probably leaving money on the table. 16 8

Programmatic platform vs direct selling 5. Packaging and bundling increase AVO (average value of order) 6.

9 Pricing Metrics and Strategies CPM common currency but doesn t capture key value point of social native advertising of social shares and quality of impressions (accidental click versus reading article, il sharing with ihfi friends) d) CPE engagement metrics are higher value for advertiser but need to standardize on these (time spent, amount read/watched, sharing, other secondary actions) Sponsorships Pricing more of an art than science, value-based pricing but may end up with higher CPMs vs other pricing models, may not be sustainable. Bundling - Value-based pricing but if used effectively can achieve client goals by matching inventory to consumer purchase journey stage in funnel 17 How are publishers pricing native? Packages 41% Sponsorship 41% CPM/CPE 18% Source: Polar,

Sponsorships Pricing more of an art than science, value-based pricing but may end up with higher CPMs vs other pricing models, may not be sustainable.

10 $4.58 CPM for Facebook sponsored stories $100K per campaign is typical for BuzzFeed (~$5 CPM)

11 Case Study: Houston Chronicle Created own digital agency (AmuseDigital.com) Sell packages for 3 month $7K/mo Move to $12K/mo within first year but annual programs in $250K range Includes assets, promoting in print Partnering with Outbrain, Navio Native ads generate 7-figures annually Stephen Weis EVP, Digital Revenue Houston Chronicle 21 Case Study: Houston Chronicle 22 11

programs in $250K range Includes assets, promoting in print Partnering with Outbrain, Navio

12 Recommendations 1. Go for Life Time Value (LTV) with clients by bundling inventory to match their campaign goals to Your inventory and its capabilities Creative execution related to stage (e.g, branding vs direct response) Long term contracts with committed clients Appropriate calls to action for low funnel native ads Appropriate metrics to funnel stage 2. Appropriate pricing metrics for stage in funnel CPM more for branding CPE for lower funnel ads Sponsorships for higher funnel 3. Check back with the client is it working? A/B testing Fine tune the campaign 23 The Local Media & Advertising Experts Questions & Comments: Rick Ducey Managing Director (703) This published material is for internal client use only. It may not be duplicated or distributed in any manner not permitted by contract. Any unauthorized distribution could result in termination of the client relationship, fines and other civil or criminal penalties under federal law. BIA/Kelsey disclaims all warranties regarding the accuracy of the information herein and similarly disclaims any liability for direct, indirect or consequential damages that may result from the use or interpretation of this information. 12

Appropriate pricing metrics for stage in funnel CPM more for branding CPE for lower funnel ads Sponsorships for higher funnel 3. Check back with the client is it working?

Local Commerce Monitor UK Wave 2 Executive Summary. October 2013

Local Commerce Monitor UK Wave 2 Executive Summary October 2013 Introduction This document defines Local Commerce Monitor UK (LCM: UK) and presents the findings from Wave 2 The LCM: UK survey is an extension