Native Strategy: Learning from the Mistakes of Display
Native advertising gives us a chance to re-write the online advertising rulebook by allowing us to come up with de-facto industry solutions and standards that will restore faith in online advertising across all major stakeholders.
Identifying the Challenges
As we prepare to enter 2015, it is clear that display advertising is increasingly suffering from an image problem. It is plagued by fraud and low creative standards. Traditional display advertising is becoming a dinosaur in an increasingly “˜mobile first’ world, where often the real estate simply does not exist in which to serve traditional banner ads. It is also undermined by poor performance. The Click Through Rate (CTR) is a much-maligned measure of advertising effectiveness – an entire topic of debate in its own right – but the reality is that for Direct Response (DR) advertisers especially, this remains a core Key Performance Indicator (KPI). Berating the KPI serves only to gloss over the inability of traditional display advertising to deliver click-focused campaigns.
Programmatic Problems – We have the fantastic strides made by the march towards programmatic trading, yet this in itself is an industry still in its infancy wrestling with the solutions needed to overcome the “˜race to the bottom’ and the wild over-commoditisation and supply of (often low quality) inventory. This naturally leads to repressed Cost Per Impression (CPMs) that fail to pay the bills for the premium publishers who maintain expensive editorial teams. Programmatic is far from broken, but it remains fair to say that it still has teething issues that need to be overcome before it achieves its premise of doing for advertising what machine trading did for banking.
Viewable Ads – We also have genuine challenges to overcome around topics like ad viewability. The IAB stance is considered by some to be a little weak, as is clearly shown by the fact that advertisers and agencies are independently enforcing more robust standards themselves. GroupM’s trading deal with CondÃ© Nast demands that an ad has to be completely in view, rendering all of its pixels in the viewable pane, before the impression is counted. The agencies are showing that they’re less interested in time on screen and more interested in ensuring their entire creative is viewed. This is understandable and begs the question “˜why has it proven so hard to come up with an industry standard around something which really shouldn’t be too difficult to solve?’ Again, in reality, the problem is heavily accentuated by the sheer volume of stakeholders in the Lumascape, all of whom have too much skin in the game in order to really want to drive change.
Banner Blindness – Finally, traditional online advertising is not addressing the end user. For many end users, addressable ads are “˜creepy’. The rising star units are attempting to address the very real problem of “˜banner blindness’ far too simplistically – by simply making ads larger. What was once a 300X250 Middle Page Unit (MPU) has doubled in size as has the leaderboard so that it is now a billboard. Many formats now take up so much real estate that the user has to scroll down before they even see the website’s actual content. This has led to a veritable explosion in the number of people using ad blocking software, an issue that’s especially pertinent in Continental European markets. AdBlock Plus, a leading provider of ad blocking software, now claims to have over 300 million registered users. This represents a staggeringly high percentage of the Internet population, and is just 19 million people short of the entire US population. The inference is clear – users are quickly moving from ignoring ads to becoming actively annoyed by them. It was easy to ignore – or be “˜blind to’ – a leaderboard or MPU, but this new breed of super-sized ads are proving too great a distraction. People are voting to remove them, and once this software is installed, it is going to eradicate the next wave of ads, leaving a huge hole in the digital economy.
All of this could lead you to think that digital advertising is fundamentally broken. Yet, this is clearly not the case since advertisers keep investing more of their budgets into the online space. The bottom line is that online display advertising remains a hugely effective advertising medium despite all of its challenges. Our job now though is to address the lessons from the past in order to forge an even more compelling solution for advertisers, which should in turn pull more dollars into our ecosystem.
The Evolution of Online Advertising
Online advertising is not seeking a revolution – instead “˜native’ represents the natural evolution of digital advertising.
All indicators point to 2015 being a huge year for this nascent form of digital advertising. Last month, a prominent UK publishing group launched a new website that is exclusively monetised using native placements, representing the first prominent commercial website to entirely abandon traditional display. Our discussions with some of the Comscore leading publishers indicate that this will not be the last site to abandon display advertising 1.0 in the very near term. This shows that native advertising is now beginning to come of age, and is moving from being an incremental revenue opportunity to becoming a publisher’s primary revenue stream.
Native represents this industry’s chance to rewrite the playbook, to learn from mistakes made and to truly deliver on what digital can achieve. On October 27th this year, the industry turned 20 years old – perhaps now it’s time to grow up and deliver on the immense potential that is still to be uncovered. So how do we do that with internet advertising 2.0? How do we learn our lessons? How do we evolve to just be better?
Finding the Fixes
First, we need to all get on to the same page when it comes to defining native, and more significantly, understanding what native is trying to represent. Native should evolve and grow to represent the death of the “˜cookie cutter’ digital ad format.
“˜Native Ad Formats’ are an oxymoron. It is paradoxical. The very idea of native placements is to find ad executions which are symbiotic with their host environment.
If banners initially worked by juxtaposing themselves with the webpage, native works by fitting in and belonging on the host website, allowing the advertiser to win engagement on the merit of their creative. If banners were agents of distraction, native represents engagement derived from added value.
PowerLinks is now working with premium top-tier publishers to create completely bespoke native ad executions, which fully match their user experience and site design. These executions are not as simple as placing a unit in a feed, or pushing down content, as they actually get to the very heart of the site’s user experience and design. Historically such customisable formats would never work in a programmatic manner, but our focus on delivering to market a format agnostic platform which focusses on KPI’s before look and feel, has enabled publishers to adopt this approach without having to build a walled garden which necessitates a huge direct sales approach. I see this as the future, and expect that over time, existing native formats will evolve to be much more bespoke.
This is key, because it immediately addresses two of the core problems with display. The first being the cross device problem.
Native Across Devices – Display advertising represents a set of formats built with desktops in mind. 20 years ago, desktop computers were the only show in town. However by late 2014, we have now evolved to the point where 34% of Americans now access the Internet ‘mostly’ via their smartphones. This is before we even consider addressing emerging markets, most of which are solidly mobile first having skipped the desktop era entirely. It is clear that digital needs a format that matches TV in as much as a TV advertiser does not have to consider the size of the TV screen because their ad is always going to adapt itself automatically.
It does not matter if you are viewing a website on a TV, a smartphone, a tablet, a desktop or anything in-between; the site will always be optimised to deliver its content first. As native placements are well embedded into the content and/or are baked inherently into a sites’ user experience, they naturally transcend devices. Again, as native ads are adaptive and responsive, just like their host site, they are easily able to serve into the vast array of different screen dimensions that they are pitted against.
Adding Value to the User Experience – Secondly, native ads work towards addressing the end user. So long as we stand firmly behind transparency and disclosure – and that is a core part of writing the industry’s de-facto code of conduct that can keep the regulatory bodies out – then we create a better user environment. When we use richer targeting parameters, like data and user understanding, in order to inform targeting then we can begin injecting value back into the user journey. Audience platforms like Facebook are winning rich ad engagement from users because increasingly they’re able to add value by aiding content discovery. A user ultimately does not mind, care, or even notice whether the creative is provided by the publisher or the brand so long as it adds value.
Native helps add creative value back into the digital equation. The display game has always been hindered by poor quality creative. For all of the data science and sheer intelligence that goes into serving display ads, so often the ultimate execution is let down by a lack of investment in the creative execution. Yet, the counter argument would say that there is only so much you can do with 75,000 pixels (an MPU). Bigger “˜rising star’ formats help add advertising real estate, but they’re increasingly custom and thus remove creative scale economies. Native executions bring more possibilities, and they open up the scaled delivery of video formats without the need for pre-roll (another one of those annoying traditional display formats). As the video possibilities scale, digital can benefit from the immense creative investment that goes into TV commercials, and advertisers in turn can get greater utility from their creative investment. The more we can break down advertising silos the better, and this is not just between devices online, but in terms of helping advertisers engage their audiences across different advertising mediums.
For obvious reasons, this all leads to better engagement with native placements. Native “˜done right’ can deliver truly astonishing performance. The stronger click through rates can largely be attributed to much greater effective viewability. Not only are these placements more likely to enter the viewable pane, but they’re also infinitely more likely to actually get viewed. Regardless of the IAB definition – when an in-image ad can out-perform an MPU by 15x despite being served only 50 pixels apart, there’s clearly more at play. Performance will improve further once native catches up with the audience targeting capabilities that PowerLinks is bringing to the table, facilitating the more complex trading which is already happening in wider display. So in reality, the greater audience engagement, stronger click to conversions (we’ve seen as high as 44%) and better video view throughs, amongst other KPIs, are to date largely driven against context alone. Clearly, there is greater mileage to come from these formats.
Solutions for Publishers – The wider array of non-traditional buyers that native attracts, including the repurposing of search budgets and the introduction of content marketing, is helping drive greater bid density and higher yields for publishers. So far, publishers are generally more willing to experiment with native because the revenue driven from these formats lands straight onto the profit column in the P&L as it is entirely independent from their existing display revenue streams. Greater programmatic adoption from premium publishers – with a genuine focus on yield optimising direct versus what the market is offering – becomes a more realistically attainable goal in this embryonic field verses display 1.0. Therefore, significant learnings can be attained which can help premium publishers drive the programmatic yields which will pay the editorial bills. It will be interesting to see how this trend continues if publishers begin to move “˜native first’ in 2015.
The Future of Digital Ads
Is native the one stop shop solution? No, of course not. Wider industry challenges around fraud and viewability transcend ad formats and represent a much deeper challenge for our industry. In an ecosystem where upwards of 40% of impressions are served against non-human traffic, there is clearly a toxic problem that needs solving rapidly. Viewability standards need consolidating, and the rapid adoption of new types of advertising possibly open the doors for new standards without having to address the challenges of retrospectively back fitting standards.
What native brings is immense promise. We know that digital advertising is a truly powerful and very effective advertising medium, and we believe that the adoption of a more native advertising experience can only help drive this further.