How can native advertising transform itself into a mature marketplace?

By 2017, eMarketer predicts that native ad spending will hit $5bn in the US. This year, it’s expected to jump from $1.6bn in 2012 to $2.85bn.

Here in the UK, native has been viewed by many publishers as a genuine step forward, enabling them to really build upon the loyal audiences and great content they already have. According to a recent report by FaR, commissioned by Adyoulike, 83 per cent of UK agencies say they are including native advertising in their media plans for the year ahead.

The study surveyed senior business directors at the top 20 media agencies in the UK, comprising a mix of heads of digital, digital strategy directors and digital business directors. The study discovered that of the 17 per cent of agencies that don’t yet incorporate native advertising into their media plans, all of them stated that they were planning to do so.

So where’s the advantage for publishers? Sharethrough and IPG recently found that consumers engaged with native ads 53 per cent more frequently than traditional display ads. Some 32 per cent of their survey respondents also said they would share a native ad with someone they know.

This increase in awareness and brand engagement is a clear indicator of why spend on native advertising is coming straight from the display pot. In fact, our panel of media agency directors told us that the format currently accounts for 9.2 per cent of total digital display spend, but that figure is estimated to reach 15 per cent by next year.

In order for this growth to continue, our study found there are two core requirements; firstly scalability and secondly metrics that deliver and measure engagement. In terms of scalability this will undoubtedly come from the technology providers enabling native campaigns to run across high volumes of different types of media owner offerings – that will therefore provide the reach and diversity of audience to deliver effective campaigns.

This growth is already beginning to occur as the technology providers’ presence becomes more pronounced in market. It’s also helped by the fact that publishers are generally now much more aware of the effectiveness of this form of advertising – from both a commercial and advertiser performance point of view.

In terms of effective engagement models our study highlighted a real shift in the market, as can be seen in the following graph.

The current market findings highlight how the industry has been experimenting with different trading models; from CPC, to CPM, through to cost-per-engagement (CPE) and also including flat fee. All of these types have around the same levels of adoption. However, when asked what they would like to buy in the future, agencies indicated a profound shift towards the CPE model as the dominant metric, with just under 50 per cent of the panel stating their preference to use this model.

FaR found the overall feedback from the panel to be that if a CPE model of buying were to be established it would be a significant driver of growth, much in the same way TrueView has been for YouTube.

What this requirement also highlights is the need for standards and clarity around the role of native, as the market has yet to clearly define what they mean by engagement. Currently the type of engagement metric an agency plans a campaign against largely depends on the type of advertising campaigns they are planning – and what the agency classes as an engagement.

The challenge with this approach is that it is very difficult to establish market-wide standards and benchmarks, as everyone has a different definition of engagement. And it is therefore challenging to grow the market as clients require clear and consistent metrics against which to assess the performance of their investment.

Our study found that there is a real demand to address this issue and that the best way to do this by creating a set of standards the market can align themelves behind and then collectively support in order to educate clients and the wider market about the role and value of these standards.

As such native is at a really interesting juncture in its development, as the industry recognises that native ads can deliver tangible value to their communication plans.

Dominic Finney is co-founder of FaR Partners

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