Native advertising is a $2.4 billion "thing," and it's not going away

By Erin Griffith , written on December 24, 2013

From The News Desk

We're about two years into the native advertising era. This mutant form of in-stream advertising is no longer a hot new category. The BuzzFeed-fueled buzz of native's hyped-up arrival has very much worn off.

This year, native advertising endured several backlashes, and it survived. For example, The Atlantic incident, where Scientologists paid to run an article praising the religion's expansion. The Atlantic pulled its piece. There was also the bizarre BuzzFeed collaboration with the Economist, which was widely mocked. And Forbes. Well, you know...

A never ending stream of of panel discussions ensued. We asked ourselves, is native advertising ethical? Are we deceiving the reader?

Jill Abramson, executive editor of the New York Times, declared that the Times would likely not adopt native advertising, because blurring the line between editorial and advertising would hurt the trust that the publication had spent 162 years earning from its readers.

Aw, well, the hell with trust. The New York Times then announced that it would, in fact, be adopting native advertising after all, prompting Ad Age to run the headline, "The New York Times Is Going To Label the Hell Out of Its Native Ads." If you label the hell out of a native ad, though, readers will know it's an ad (which defeats the purpose), so then is it still native?

The Times is not the only traditional media company to embrace native advertising. The Washington Post has. And Forbes, of course. The Wall Street Journal. The Atlantic. Likewise, new media companies including BuzzFeed, Mashable, and Politico have also gone native.

Like it or hate it, native advertising is now officially a "thing." The Federal Trade Commission recognized that much by holding a hearing to discuss the category earlier this month. The panel concluded nothing, except that it "raised more questions than it answered."

But we haven't known just how big of a "thing" native is until recently. The Interactive Advertising Bureau does not measure it, because it can't be standardized across sites and apps and outlets. (That is, after all, the very nature of native. It's "native" to each format.) Native is closely interwoven with social and mobile advertising, and it's difficult to extract it as a sub-category.

That hasn't stopped others from trying. Last week BIA/Kelsey reported that native advertising represented $2.4 billion in advertising spend this year, a 77 percent increase over last year. The study expects native advertising to hit $5 billion in 2017. BIA/Kelsey defines native advertising as "branded content integrated directly within a social network’s user experience (i.e., the newsfeed or content stream)." It's hard to break those things out -- Facebook doesn't break out how much of its ad spend is Sponsored Stories versus its boring old display ads on the side of the page, for example.

eMarketer data tells a similar story, predicting $1.9 billion in native ad executions this year and $3.2 billion by 2017. Of course, eMarketer counts its dollars differently, putting social media ad spend like Sponsored Stories on Facebook in the "display" bucket, and only including sponsored stories like that of BuzzFeed, Mashable, and Vice media in the "native" bucket.

These numbers are nothing to scoff at. Native is here to stay and those big question marks about scale are no longer being asked. (The answer -- "we don't know yet" -- is not particularly satisfying, but nonetheless, the questions are no longer being asked.)

Now, the conversation about native advertising will be less about what it is, and how it works, and more about whether it works or not.

Henry Blodget, CEO of Business Insider, says he's not interested in native advertising because he doesn't think it's a very good ad. Not to mention, it only reaches the people who clicked on that specific sponsored story.

"Some of the stuff BuzzFeed’s doing, I wonder about it," he said at a recent PandoMonthly. "What I see is a very entertaining listicle with some fun GIFs on it, and then I see a tiny little blurb that says 'Brought to you by' at the top. What I think when I see it is, ‘Hey, wait a minute, the listicle has nothing to do with the sponsor, and I get a tiny little message. Whereas if I just bought an ad it would be big and beautiful, and beautifully designed, and I’d get the message that way.'"

As native advertising becomes an increasingly large piece of the overall digital ad spend in 2014, this will be the big challenge to solve.