by Nima Wedlake on May 19, 2016
As investors in the digital advertising space, we’re always interested in new approaches to delivering brands messages online. Over the last several years, native advertising has clearly emerged as one such approach. The ad format — which follows the natural form and function of the site or app where it is placed — is common on social platforms (e.g. Facebook’s News Feed ads) and media sites like Buzzfeed and Vice. Many studies have shown that native ads perform better than traditional display advertising, often yielding higher CPMs for publishers and better performance for advertisers.
More recently, we’ve seen a wave a startups build the infrastructure to buy and sell native ads programmatically. What was historically a very high-touch, direct sales process between brands and publishers to create custom “branded content” is evolving into something that more closely resembles the display advertising ecosystem: automated, real-time buying of native ad inventory across thousands of publishers. Many refer to this as “programmatic native”.
Although programmatic native is still relatively nascent, spend is expected to increase rapidly over the next several years and will likely surpass other forms of programmatic ad spend in the US by 2020. To better understand this emerging ad format, we’re publishing a research report on native advertising that covers the following:
- Who are the market leaders across the native advertising tech stack (DSPs, SSPs, exchanges)?
- Who are the primary buyers of native inventory (brands, direct-response advertisers, etc.)?
- How does the native ad format perform vs. other ad formats?
- Who are the primary sellers?
- How do we expect the market to grow in the next several years?
We’ve embedded the research report below, and you can download directly here. Some key takeaways from the report:
Native is not ‘display 2.0’ — it’s a novel format with unique advantages and challenges
While native ad units often yield better user engagement, the process for deploying native ad campaigns is unique to the format. The creative process, pricing model, success metrics, and user experience with native advertising programs challenge traditional display advertising execution patterns, which has likely resulted in slower than expected adoption of the format.
Native works best in mobile environments, where banner clickthrough rates are near zero
We expect much of the growth in native advertising spend to be funneled into mobile; according to IHS, native will account for 63% of all mobile advertising spend by 2020. Additionally, Facebook has reported that 83% of impressions on its mobile-only Audience Network are in the native format & that native ads perform 6x better than traditional banner ads.
The rise of ‘programmatic native’ has been limited by slower adoption on the buy side
According to Business Insider, advertisers will spend $5.7B on programmatic native by 2018 — but large buying platforms have been slow to integrate native into their offerings. We expect the multi-channel demand-side platforms to accelerate integrations with native vendors in the back half of 2016.