While native advertising continues to be a driving force behind digital ad growth, there are several threats that could potentially impact the popular ad format, according to new data from Native Advertising Institute and International News Media Association.
The study, which surveyed 156 media companies across 48 countries, found that 55% of respondents cited a “poor client understanding” as the biggest threat to native advertising. This corresponds directly to publishers’ biggest challenge regarding native advertising – explaining the ad proposition to advertisers.
The knowledge gap of native advertising among publishers and advertisers is alarming.While the majority of native growth is currently propelled from social platforms such as Facebook and Twitter, publishers are also aggressively pushing for this ad format on their sites as a way to be less invasive for consumers that are increasingly turning to ad blocking software.
It is imperative for these publishers to clearly outline the benefits and ROI associated with native advertising to obtain a complete buy in from marketers and minimize any hesitance.
Publishers stand to gain from this fast growing ad format if they can overcome the above issues. In fact, revenue from native-style display ads will more than double over the next five years, from $21.29 billion this year to $47.41 billion by 2021, according to BI Intelligence estimates.
These native ads — or ads that take on the look and feel of the content surrounding them — are taking over digital advertising.
By 2021, native display ad revenue in the US, which includes native in-feed ads on publisher properties and social platforms, will make up 74% of total US display ad revenue, up from a 56% share in 2016, according to new BI Intelligence estimates based off historical data from the Interactive Advertising Bureau (IAB) and PwC, as well as IHS.
The rapid uptick in native’s share of display ad revenue can largely be attributed to the dominance of social platforms like Facebook and Twitter — which were early champions of native and rely almost entirely on native formats — as well as the introduction of new programmatic technologies that are making it easier for publishers and advertisers to scale native campaigns.
Margaret Boland, research analyst for BI Intelligence, Business Insider’s premium research service, has compiled a detailed report on native advertising that breaks out native ads into three categories: social native, native-style display, and sponsored content (also referred to as premium native). It provides forecasts for how revenues from these formats will grow over the next five years and looks at what factors, in particular, are driving up spending on each of these ad units. As a note, because revenues from these three types of native content can overlap, it does not provide an overall native forecast. Finally, it lays out some of the challenges that face properties that rely on native ads, namely ad frequency and scalability issues.
Here are some key takeaways from the report:
- Native-display ads, including social native and native ads in-feed on publisher websites, will make up the bulk of native ad revenue from 2016-2021. Native display ad revenue in the US will rise at a five-year compound annual growth rate (CAGR) of 17% during this time period to eclipse $47.02 billion. The rise of native video ads, particularly on social platforms, will be one of the main drivers of this growth.
- Social platforms generate most of their revenue from native ads and will continue to dominate overall native ad spending through 2021. The dominance of social platforms like Facebook, Instagram, Twitter, and Snapchat on mobile devices, where the entire experience is within a feed, will help propel social’s contribution to overall native ad revenue through 2021.
- Sponsored content, which is categorized separately from native-display due to the direct relationship between publishers and brands in creating the format, will be the fastest-growing native format over the next five years. However, the high cost to produce these ads and the limitation in inventory will limit the format.
In full, the report:
- Forecasts US native ad revenue growth from 2016-2021 through three separate forecasts: native-style display, social, and sponsored content.
- Identifies the major drivers of native ad revenue growth.
- Discusses key players within each category that are contributing to the rise of native.
- Presents some of the challenges of wide-spread native adoption with BuzzFeed as a prime example.
- Lays out future opportunities for native ads, including virtual reality, messaging apps, and TV.
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