happy-phoneThe phrase native advertising is still a new buzzword, but it is an already an abused term, used to described sponsored content, advertorial, and a variety of other ad forms. Its root definition is really something much more basic: an advert delivered within the context of the natural user experience. Think an ad coming into your Facebook feed, but looking like it could be a post from one of your best friends.

On mobile specifically, native ads are something that only a select amount of large exchanges can offer at scale. InMobi, founded in 2007 and now the world’s largest independent mobile ad network, wants to change that with its own native ad exchange. After trialling out a beta version in January, it released the platform to all comers just over two weeks ago with over 1,000 customers at launch.

CEO Naveen Tewari says that at an elemental level native, advertisements change the balance of power between publisher and advertiser. The ad must be created in the context of the user experience that the publisher desires. It’s has been a challenge for smaller companies to do this at scale previously, because it requires asking the advertiser to create new ads just for their platform. Only companies like Google, Facebook, or Twitter have had the scale and the clout to persuade companies to input new content and work from the ground up.

In InMobi’s experience, advertisers have been surprisingly amenable to giving up the power to dictate the appearance of their ads.

“Advertisers never wanted that power,”  Tewari says. “Think about it from the advertisers point of view. This means that their ads appear in the best possible format in front of the best possible user.”

InMobi’s new exchange is the result of two years of work, according to Tewari. The company had to create a system that minimized the work advertisers need to put in and which could scale “to infinity.” What they hit upon was a way for advertisers toinput their pre-existing creative assets and to make them “liquid,” Tewari explains. Messages and images can be stripped out and then configured automatically to take on whatever format the publisher desires. The company has made it so easy for clients to enroll, that some clients have gotten setup on the exchange in as little as two hours.

The idea hit Tewari when he found himself bemoaning the dominance of banner ads for the umpteenth time. “I thought, we’re building a huge business here, but I don’t like building that on banner ads. I don’t think they’re good for business,” he says.

Mobile advertisers had been stuck for too long with the banner ad and little alternative. It was simply the best available option. Tewari says banners don’t work with the limited real estate available on mobile home screens, taking up too much space. Proving as much, return on investment immediately jumped 4 to 5 times when InMobi launched its new exchange. Perhaps the most compelling statistic for Tewari was the the fact that 15 percent of InMobi’s advertisers hadn’t invested in mobile before the company launched its native mobile exchange.

“They never wanted banner ads to be put into the system before,” he says. “Now they’re saying with this, that they want to integrate.”

As the largest independent player in the category, InMobi has made a somewhat of a habit of trying to upstage the Googles and Facebooks of the world. The company has grown revenue north of $500 million and has routinely out maneuvered the bigger players with smart acquisitions in areas like tracking, analytics, and HTML5. Tewari says with a certain swagger that InMobi’s new native ad play is a direct run at the big guys, swearing that anyone who values user experience, monetization, and return on investment is best suited going with them.

“Anyone not working with us is guilty of missing out,” he says. “Brands don’t to stick to the sites where they’re not being best represented.”

InMobi is smart to add this native mobile exchange. The company’s ad network has access to over 700 million users across approximately 160 countries.

But, this notwithstanding, the big guys simply can’t simply be wished away like Tewari hopes. We spend more time with within their apps than any other. The big social media and search networks have a clearly defined native experience in which ads can make sense, something most less well known apps cannot claim. These companies also have their format down to a science, wheras InMobi relies on smaller, less seasoned publishers setting a workable template.

Tewari hammers the same point repeatedly: that this idea is disruptive and could be a major thorn in the side of Google and Facebook. The idea does make sense on its surface, but his company is still the David fighting a group of Goliaths.

The best thing InMobi’s exchange has going for it is the ability to offer seamless delivery of an ad format that is in demand. As such, this move should at minimum help protect its status as a major independent player. But if InMobi wants this platform to be seen as the Facebook alternative, Tewari is setting himself up to convront the longest of long odds.

[illustration by Brad Jonas for Pando]