How Much Does Transparency Matter in Native Advertising?

This week, the New York Times became the latest and most high-profile publisher to run native advertising, running a package of content for Dell. It joins Vanity Fair and the Washington Post at what is shaping up to be a very big party.

Native advertising, also known as branded content, sponsored content or advertorial, can bring in an astounding amount of revenue. According to the American Press Institute, BuzzFeed draws all of its revenue from the model; and more than 50 percent of the Atlantic’s digital revenue is tied to native campaigns. In a blog post, Lewis Dvorkin, chief product officer of Forbes Media, said the publisher expected to have 26 BrandVoice partners, including IBM, Xerox and Siemens at the end of 2013, accounting for 20 percent of Forbes’ total advertising revenue. Disclaimer: I write for two Forbes BrandVoice blogs.

Both the Federal Trade Commission (FTC) and the Interactive Advertising Bureau (IAB) have cast their eye on this medium of the moment. In December, the FTC held a workshop for publishers and advertisers to explore whether and how it should be differentiated from editorial content.

Sophia Cope, director of government affairs/legislative counsel for the Newspaper Association of America, who attended the workshop, thinks the question the FTC wants to answer is, can the regulations and best practices of print be somehow transposed into digital? “What makes digital different is there’s so much more you can do – video, design, and the variety of how it’s presented and how it’s called out as being separate,” she says.

The Newspaper Association of America is monitoring the issue and trying to educate its members, according to Cope. It’s not yet ready to lobby. “This is such a new issue and not that many newspapers are doing this,” Cope says.

The IAB released a Native Ads Playbook, in an attempt to set industry standards. The Playbook covers ad units, formatting, disclosure and even attempts to define six standard units: in feed, paid search, recommendation widgets, promoted listings, within standard ad units, and custom – in other words, anything else you might want to define as native.

Rebecca Davis, an executive vice president and group head at Ogilvy, says the IAB’s Playbook was useful in helping to lay out the landscape, and she agrees that there are established models the industry can use. At the same time, she notes that the situation is different for web-native publications, many of which have always blended in advertiser content, than for print-centric publications like Vanity Fair.

“The way brands and editorial teams interact in digital is a more fluid model. Properties like WebMD have had longstanding relationships with certain brands and have built out spaces on their sites that are sponsored spaces. The digital publishers always attacked it more specifically and in a more aggressive way. As the larger publishers have become more and more innovative in the relationships they’re striking with brands, we’re starting to see publishers tackling this in a more specific way.”

There’s good evidence that native advertising performs, aside from the alacrity of publishers getting in on it.

IPG Media Lab did two studies on native ads, one commissioned by native advertising platform Sharethrough and one by Forbes. The Sharethrough study, completed in May, surveyed 4,770 consumers, adding an eye-tracking study of 200 consumers. The native ad units registered an 18 percent higher lift for purchase intent and 9 percent higher lift for brand affinity. Consumers looked at native ads 53 percent more frequently than banners, and 25 percent more consumers looked at in-feed native ads, compared to banner ad units.

In October, Forbes released its own study with IPG involving 2,259 consumers. It found that people viewing branded content were 41 percent more likely to intent to purchase the product.

Forbes Brand Voice advertisers pay a monthly site license fee of $50,000, according to Mark Howard, Forbes Media’s chief revenue officer; for $75,000 a month, they also get home-page placement and paid distribution. Soon, Forbes will release a new page design that includes headlines of native ad units inline, instream and in edit wells. “We’ll be able to schedule, track and optimize delivery,” Howard says.

When they talk about native advertising, publishers always emphasize transparency, that is, making it clear to readers what’s paid content and what’s not. In fact, Dell’s front-page native ad on NYTimes.com looks more like an ad than content: It’s a Dell-blue box with a teaser for the story that begins with “PAID POST:”

Whether readers understand the difference or care about it is murkier.

The American Press Institute recently published a white paper detailing the native content strategies of six different publishers. The report noted that one challenge is, “… it’s difficult to know what readers’ tolerance for and reaction to sponsored content is. For all the talk on many sides about whether credibility is affected, no one knows for sure.”

In fact, in the Sharethrough study, consumers seemed to prefer branded content to editorial content. Slightly more people looked at native ads than at editorial content (26 percent vs. 24 percent).

The Atlantic did suffer notable criticism in its first foray into branded content in January 2013, when it ran a package paid for by the Church of Scientology. A spokesperson for the news site commented only, “We’ve spoken about it enough.” The Atlantic now runs a native ad in its featured-stories banner on its home page with the rubric “Sponsor Content.”

Ogilvy’s Davis says more research on the issue of consumer receptivity and trust needs to be done, but she sees a generational shift in consumers’ relationship to brand content. “We notice that Generation X has a different relationship with brands and content than previous generations,” Davis says. “They have a great deal of trust in high-quality brands and an interest in interacting with content that brands provide.”

Howard says Forbes works hard to educate its brand publishers, assigning each of them a producer with an editorial background. He welcomes the recent input from the IAB and FTC. “Because it’s native, it doesn’t lend itself to it being totally standardized. It needs to be flexible, dynamic and in line with the experience of each of the different sites,” he says. “But having a larger industry discussion on how this will work will raise our approach on how we do this with an eye out for disclosure and transparency.”

Davis thinks the worry about brands somehow fooling consumers into thinking their stories were written by the publication’s staff is a red herring. “I’m not 100 percent certain that the success or failure of native advertising will be about tricking the reader. The success of this as a media type will be wrapping the right kind of promotion around it and the quality of the content,” she says.

Howard agrees. “Content with merit will find an audience. Only the audience can be the judge of that. They will find it, engage with it and share it, and more people will discover it.”