HOW PIONEERING MARKETERS CAN NAVIGATE THE UNCHARTED TERRAIN OF THE NATIVE AD. by edwin wong AN INFORMATIVE ANALYSIS AND GUIDE SPECIAL SECTION

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1 HOW PIONEERING MARKETERS CAN NAVIGATE THE UNCHARTED TERRAIN OF THE NATIVE AD. by edwin wong AN INFORMATIVE ANALYSIS AND GUIDE ANA.NET // 9

2 AS THERE AS LONG HAS BEEN consumers have had to contend with enticing appeals to sample the latest this or the newest that and decide when if ever to give it a try. Today, tech enthusiasts seem to face this conundrum on a daily basis. From smartphones to wearables to other gadgets, there s always something new vying for a consumer s attention or looking for pioneers to help it take hold in the market. Similarly, advertisers in today s rapidly evolving digital world are up against a constant influx of emerging tools, technologies, platforms, and formats that promise to help achieve greater results. But which ones to choose? And how soon after they ve entered the market? Researchers at the University of California at Berkeley have found that when the number of users of a new product is plotted over time, the resulting picture of diffusion (i.e., the curve that illustrates the rate of adoption) is typically S-shaped. Adoption of anything new is usually slow at first, accelerates as the product catches on, then slows down as it reaches a point of saturation. Sometimes a new technology replaces it and the process starts over. To illustrate this point, look at the rise of the DVD. It swiftly replaced the VCR, then was supplanted just as quickly by streaming video. In fact, in 2012 Bloomberg Business reported that more movies would be streamed in that year than would be watched on DVD. A year later, Bloomberg reported that pay-tv subscriptions like cable and satellite had declined for the first time ever. More recently, as reported by Flurry from Yahoo in 2014, mobile displaced TV as Amer ica s first screen, based on people s average daily screen time by device. New digital platforms have been at the center of these adoption curves. NATIVE S TIPPING POINT This shifting media landscape should put advertisers on alert. With people s attention moving to digital services and mobile devices, clearly that s where advertisers focus should be as well. The dominant digital display ad format of the past decade, the banner, seems to be heading toward its own inflection point. What s next? The native ad, an advertising method in which the advertiser looks to engage an audience by providing messaging in the context of the user s experience. According to the 2014 Native Advertising Report, released by Advertiser Perceptions, publishers are embracing native advertising formats, with more than 72 percent currently offering native ads or planning to offer them within the next few years. And advertisers are responding: a 2014 Mixpo survey reveals that 79 percent of advertisers plan to buy native ads in 2015, a 13 percent increase from (See Figure 1 on page 12.) Native is poised to be the fastest growing ad format of This rapid adoption means that native is going to be a key part of most digital marketing strategies and a big business. According to reports from emarketer, native advertising will grow from a $4.3 billion business in 2015 to about $7 billion by 2017, and will nearly double by 2018 to just shy of $9 billion. To help advertisers make this transition seamlessly, what follows is a native advertising primer, including an explanation of what it is, tips on how to implement it, and examples of how others are using it to great effect. WHAT ARE NATIVE ADS? Recently, MediaPost contributor Eric Berry of TripleLift noted that by virtue of its very nature, native is idiosyncratic. This rings true, as native ads are not standardized across publishers, they re molded to match each publisher s content experience. Native ads can and should look different in different environments. In-stream ads, content recommendation widgets, content marketing, and paid search are just a few native ad variations. What these variations have in common is they immerse a brand s message naturally among content that consumers care about. PREVIOUS PAGE/SHUTTERSTOCK; LOWE S 10 // ASSOCIATION OF NATIONAL ADVERTISERS

3 ADVERTISING, To help marketers create winning native campaigns that match context, maximize engagement, and ultimately drive emotional recall and purchases, Yahoo partnered with the University of Pennsylvania s Wharton Future of Adver tising Program to identify, among other findings, three tenets brands can use to guide their native ad strategy. 1. Effective integration: An ad is integrated when it is presented in the same way as associated content, personalized for the viewer, optimized for the device, and related to the context of the page or article. 2. Overt transparency: Transparency occurs when an ad is recognized as sponsored content. Consumers should know an ad by demarcating it with a symbol or a sponsored label. 3. Aligned objectives: Consumer and advertiser objectives align if sponsored content is relevant and valuable. What s important is that not only the advertisers goals are considered, but also the middle ground, where advertisers and consumers meet and value is exchanged. When marketers create native campaigns with these tenets in mind, both advertisers and consumers benefit. The State of Native Advertising 2014 report from Hexagram and Spada says that 67 percent of advertisers believe native ads provide a more relevant message, and 63 percent say that native ads generate more engagement. More importantly, consumers respond positively, with 60 percent holding a favorable view of native ads, according to the report. Increased engagement and positive sentiment help native advertising deliver on marketers branding and performance goals, even on newer media platforms like mobile. For example, a native travel campaign in a mobile content stream increased top-of-mind unaided awareness by 114 percent, according to a Yahoo study. On the performance side, a separate study across nine advertisers found that native ads generate 3.9 times the lift in advertiser site view-through than standard display ads, and 3.6 times the lift in branded search activity, compared to traditional display units. BRAND AND PERFORMANCE ADVERTISER RESULTS Native ads drive measurable performance for advertisers in a number of categories. To dive even deeper into native ad effectiveness, Yahoo and BBDO measured key performance indicators (KPI) on brand sites following a native ad interaction and compared this KPI activity to a control group that did not see any ads. Both upperand lower-purchase funnel consideration activities actions like viewing product pages or adding a product to a shopping cart were included. Lowe s FixinSix gives quick tips over Vine. CASE STUDY Lowe s Enters the Native Ad Game Lowe s knew that consumers loved quick tips for home improvement, and the emergence of the Vine platform presented an opportunity to deliver these tips as six-second, stop-motion videos. The resulting campaign, #LowesFixinSix, was an instant hit. To maximize its reach, the videos were promoted with native ads on Twitter and Facebook. These placements were well received, as they blended into the environment of these platforms by offering a useful piece of information in a bite-size form. As the Vine technology evolved to allow external content capture beyond just a smartphone, #LowesFixinSix also evolved creatively and distribution scaled to reach a wider audience through in-stream native ads on Facebook and Twitter, and native Buzzfeed listicles. To date, the Buzzfeed listicles have generated more than 425,000 views, and since the campaign was launched in May 2013, the #LowesFixinSix Vines themselves have seen more than 34 million loops. Daniel Charness, BBDO ANA.NET // 11

4 Advertisers were consulted to make sure each KPI made sense. For example, for automotive advertisers it was car configuration, for tax services it was lead generation, and for mobile providers it was the start of a service plan. Visitors to these advertiser pages who were exposed to native ads were more likely to transact on brand KPIs than visitors who arrived organically. For example, automotive sites saw a 1,412 percent lift in KPI activity if visitors were exposed to native ads. (See Figure 2 on page 13.) As the results show, when people are exposed to native ads they transact and create material value for advertisers. The brands featured in native ads also come to mean more to consumers. Native ads move brand metrics, specifically on platforms like mobile. In a recent study with Kenshoo, Yahoo found that most marketers are starting to value mobile native ads for their ability to influence midfunnel metrics. In one case study from a travel advertiser, a mobile native ad drove an 80 percent increase in awareness and a 33 percent boost in favorability. It s also worth noting that there were statistically significant movements in softer metrics, such as to what degree one travel provider differentiated itself from the competition, and how well it was perceived to meet traveler needs versus its competitors. BEST PRACTICES FOR NATIVE ADVERTISING The shift to native is undeniable, and its potential to provide value to both advertisers and consumers is a welcome change. For marketers preparing to venture into this new frontier of advertising, these three tips will help navigate the terrain and maximize results. 1. Select the right platform In a recent study with Added Value and Innerscope, Yahoo interviewed 30 agency executives and brand managers to get a Figure 1: The Rise of Native, What advertisers are planning to buy in 2015, compared to DISPLAY SOCIAL MOBILE VIDEO SEARCH NATIVE STREAMING MUSIC OTHER DIGITAL 26% 27% better understanding of the challenges they face when making media budget decisions. Balancing efficiency with engagement emerged as a primary issue. Advertisers said that building relationships with consumers and presenting their brand within a premium environment was critical to success. Four key characteristics emerged that distinguished a media environment as premium: Design: Modern, clean, and simple palettes Editorial: Respected experts with a good consumer reputation Ad formats: Innovative ad units that offered something new Native: Ads that blend seamlessly into web pages and apps To validate these findings, biometric research was conducted on a large group of consumers. One of the goals of this research was to identify any difference in response between participants who were exposed to content with native ads and those who saw content with traditional 59% 87% 87% 82% 79% 82% 78% 77% 70% +13% CHANGE 79% 66% Source: Native Advertising Report Perceptions & Trends, Advertiser Perceptions, July 2014 standard display, both on PC and mobile. Using eye-tracking technology and measuring actual user attention, the research helped to create a visual heat map that compares a standard mobile banner (normally placed at the bottom of a screen) to an in-stream native ad. The transparent native ad was more aligned with consumer interests and, as a result, generated three times more attention. People spent almost as much time looking at the native ad as they did the actual articles. With the mobile banner, even though the ad is always visible at the bottom of the stream, people spent only 0.9 seconds looking at the ad unit. By comparison, participants fixated on the mobile native ad for an average of 3.2 seconds. This engagement leads to action; participants were 1.8 times more likely to click on the native ad than on a banner in the non-premium environment. Ultimately, premium environments and native ads create a halo effect that drives greater engagement, something all advertisers want. 12 // ASSOCIATION OF NATIONAL ADVERTISERS

5 Figure 2: KPI Activity, Percent Lift (Control vs. Exposed) 103% TAX SERVICES 471% RETAIL 128% ENTERTAINMENT 539% TECH & TELCO 135% CREDIT CARD 2. Engage with content In a recent Forbes article, contributor Benjy Boxer of NewsCred, summed up many advertisers views, stating, Content is at the heart of native advertising. Surveys back this up, with the Hexagram and Spada native advertising report showing that 53 percent of advertisers consider sponsored content a form of native advertising. In a 2014 study conducted with Ipsos and Audience Theory, Yahoo asked users about their impression of sponsored content and measured the impact of this native ad format. Millennials seem particularly open to sponsored content. When discussing whether sponsorship would influence their likelihood to share content, one interviewee s response was indicative of the Millennial point of view: For me [when it comes] to sharing, if it said Ford it wouldn t be a big deal it wouldn t make or break whether I was going to share or not. Simply put, consumer and advertiser objectives align if sponsored content is 1,337% ONLINE AUTO SERVICE 319% QSR 374% HEALTH AND WELLNESS 1,412% AUTO Source: Yahoo/Millward Brown Digital Behavioral Impact AdFx Study, May 2014 Note: Lift is calculated between the control (not exposed) and those exposed to advertising relevant and valuable. Another notable survey result quote: Good content is good content; people are open to helpful information from brands. This has been proven true on Yahoo Food as well, where 52 percent of users say promoted advertising content helped them learn more about cooking. 3. Be transparent Transparency in native advertising enhances users perceptions of a campaign. When native ads are clearly denoted as advertising, they get better results. Yahoo recently had a brand sponsor content during a large sporting event. When analyzing how engaged consumers were with the content, the ads appeared to be relevant, on point, and native to the experience. Yahoo expected to see positive results, but test and control scores came back flat. After taking a second look at the sponsorship to understand what the issue might be, the researchers identified opportunities to make adjustments. A second phase of testing was conducted, with two test groups. In the first group, the brand s logo was made more prominent. In the second group, the prominent logo was added and the headline was also changed to a stronger call to action. The results showed that when a native campaign is transparent the brand sponsoring the content is clearly and prominently identified the advertiser benefits. The test, conducted by Yahoo and Ipsos, saw statistically significant lifts of four points in purchase intent for the image with the logo and eight points for the image with the logo and the new, stronger headline. Keep in mind that this was a leader brand with strong purchase intent benchmarked at approximately 70 percent. Corresponding metrics for awareness, recommendation, and favorability also went up significantly. Afterward, during a head-to-head comparison, people were asked to evaluate the original, minimally branded native test ad against the ad with a more prominent logo; consumers appreciated the transparency and were significantly less likely to feel misdirected. Of those surveyed, 66 percent said the native ad with prominent logo represented a great experience, with only 12 percent saying that the ad looked too much like an article. People who called it a great experience noted that the native format was better than other ads, was not disruptive, and was a natural fit within the experience. The bottom line: native advertising isn t just new advertising, it s smart advertising. The growth of native is simply a result of ever-changing consumer needs, behaviors, and preferences. To get ahead of the competition and embrace the next big innovation in digital marketing, remember to think native, choose the right environment, be engaging, and be honest. Edwin Wong is the senior director of research and insights at Yahoo. him at edwinw@ yahoo-inc.com. ANA.NET // 13