Native Advertising Will Save Us All. Maybe.

By Erin Griffith , written on October 3, 2012

From The News Desk

Lately, whenever I rant about the many disappointments of digital advertising, I'm told to look at native ads. They are The Future of advertising online. Or something. At the very least they're the buzziest thing to happen to digital ads since video pre-roll.

The basic definition of a native ad is one that's delivered "in-stream." It's tailored specifically to whatever site or app it appears in. Twitter's Sponsored Tweets are native. Facebook's Sponsored stories are native. StumbleUpon's Sponsored Stumbles are native. Whatever Tumblr is doing is also native. Etc.

Advertisers are pretty jazzed on native ads for a few reasons. For one, they're not intrusive. And users almost expect them. They don't interrupt what a user is already doing because they appear in the same feed as the rest of the content on the page. They provide "engagement" over the clicks and impressions, which typically means they're a hell of a lot more effective than banner ads retargeted times infinity. They are the difference between brands as annoying salesmen, pushing users to pay attention to something they don't really care about, and content-creating "friends," suggesting, recommending, chatting, and generally just hanging out.

Native ads are digital ads that don't suck. That may be because they weren't invented by advertising people.

For years digital ad innovation has centered around small tweaks to an ineffective ad unit. It's "highly optimized" crap, industry vet Yaron Galai likes to say. A banner ad unit is passed through countless hands, data sets, and algorithms before it finally gets served, with each entity in the daisy chain scraping a fraction of a cent off the top. It's ridiculous that so much time, money and effort has gone into improving an ineffective advertisement that nobody looks at, clicks on, or particularly enjoys.

But a massive industry has been built around these ads, and display, a category worth $32 billion, is growing more quickly than search, according to recent research. Which is why it has taken a group of startups with little understanding of digital advertising to spur the most notable change.

Startups including Facebook, Tumblr, Twitter, and StumbleUpon have all developed native ads; offerings from Pinterest, Path and Foursquare are on their way. They have one thing in common, Chris Cunningham, the CEO of Appssavvy, said in a town hall discussion at the IAB Mixx conference in New York earlier this week. They all put their user experience in front of anything else, including making money. "For them, people are never going to be trumped by ads," he said.

That's not easy for brands used to pushing an ad and writing a check to a publisher to understand. Further, as I wrote earlier this week, brands too often think "partnering" with a startup is akin to hiring a creative agency. But startups turn down more brand partnerships than they accept because they value user experience above all else. They've worked hard to build trust with their users; the last thing they want to do is lose that for a one-time paycheck from a brand.

They're proceeding with caution with native ads. When Facebook introduced Sponsored Stories at its fMC conference earlier this year, the fear that brands would ruin the user experience with spammy status updates on steroids was palpable. The company carefully educated brands to provide quality content to their fans, not intrusive ads. At the end of the day, volunteers handed out posters reading "think / ̶m̶a̶r̶k̶e̶t̶ / share." They may as well have said "please / don't / spam."

Native ads, driven by startups that are careful, picky snobs (for good reason), could change online advertising for the better. Except for one little problem: They don't scale.

That's because native ads are not easily repeatable. The "set it and forget it" days of designing a standardized IAB-approved banner ad and sending to to 100 different ad exchanges won't work for native ads. Creating effective native ads requires creating effective content, custom-tailored to whatever platform it will appear on. Content is difficult and expensive. It requires (expensive and slow) humans. It's subjective. This is the achilles heel of native ads.

That may not be the case forever. "Mass customization is the new paradigm," Cunningham said. He expects that one or two major players — likely Facebook — will eventually dominate native ads across many platforms, making them easier to purchase at mass scale.

The tipping point will be when large brands begin to ask how they can optimize their creative work for native ads before they build it, rather than backward engineer it into this new format. For those of us who absolutely detest traditional display ads this can't come soon enough.

[Illustration by Hallie Bateman]