Can old media afford to turn their noses up at native advertising?

By James Robinson , written on February 14, 2014

From The News Desk

Given the menacing long term financial outlook facing even the strongest of old media companies such as the New York Times, the squeamishness toward the Times’ first foray into native advertising last month is confusing.

It must be difficult for a journalistic institution like the New York Times to admit, but it has a terrible website for delivering advertisements to its readers. With one of the most trafficked landing pages in journalism, if you head there now you’ll see only a couple of squashed, small display ads.

So it wasn’t shocking that when the New York Times released its 2013 financial results last week the best it could say about advertising revenue was that it decreased at a slower rate at the end of the year than it did at the start.

The report held wall-to-wall bad news. Taken year-over-year, digital subscribers were up 19 percent but circulation revenues overall fell 3.9 percent. More people were reading online on a website it was making less money from. Print ads are dying slowly. In 2013, eMarketer estimates that another $1 billion was squeezed out of the print market. It is still a plus-$30 billion industry and we’ve got decades to go before that craters entirely, but what will follow will look like a slow outgoing tide.

Setting aside questions of journalistic purity, the Times’ partnership with Dell last month was a first step towards arresting falling revenue. But where was the trade off? It was carefully done. A content team separate to its editorial staff worked with Dell to construct a short series of articles that were nestled into a clearly differentiated section of its website. It had a very different look and feel to any of the newspaper articles. There was no real chance at confusion.

Sure, much in the way that when Facebook or Twitter started to monetize it  felt unseemly to be seeing advertisements were previously there were none, for an old school print person seeing the Dell partnership might have elicited wistful pangs for days of old.

But the backlash, with one commentator going as far as accusing the New York Times of having “sold its soul for a handful of beans” is shortsighted. Sensitivities about native advertising had been bubbling for months, resulting in an FTC advisory hearing on safe practices last December. Done right, they can give an ailing industry new life.

It has been predicted that the market for sponsored content will grow by fifty percent to be worth $3.1 billion by 2017. As the pool of print advertising gets forever smaller, that’s an extra $1 billion for old media companies to chase and a new chance at regaining some semblance of momentum.

Old media needs to adapt and chase this money. It has been whooped in the last ten years by digital first publications and social media companies. Facebook made 132 times as much money as the New York Times website did last year. Taken off Quantcast web data, the New York Times makes less than a dollar for every unique hit to its site. Facebook makes nearly $5 off each of its America users, most of which came from native advertising.

The New York Times - and other media publications like it - have the audience size but are not seeking the value from it to be sustainable. To hold back from being aggressive in utilizing its readers is to guarantee eventual extinction.

The power of an ad displayed in the context of an individual website is undeniable.

At last night’s Pando Monthly event, Vox Media CEO and Chairman Jim Bankoff talked about the potential with native advertising in taking the right brand and helping them tell their stories well to the right audience.

“Increasingly advertising that feels native to the medium is going to win,” Buzzfeed’s Jonah Peretti said back in 2011.

Whether it’s native advertising, well-done product placements, or Pandora targeting ads to listeners based on political persuasions, online advertising is now the dominant advertising market and it is evolving rapidly. By holding their collective noses, traditional media companies risk getting even further behind.

The real estate for on a website will never be as profitable as a whopping big paper newspaper. But with the line between ‘ad space’ and ‘editorial’ coming down, it affords an opportunity for publications to leverage reputation to increase digital revenue. If it is done right and respectfully, it is an opportunity not a threat.

A survey by MediaBrix in 2012 found that as many as 85 percent of people had a negative opinion of a brand that used sponsored stories. That will come down as people adapt, but even if it doesn’t, native advertising would still be more popular than the New York Times going out of business.

[Image courtesy of Steve Rhodes]