Now & Next is a new feature from ExchangeWire Research. In Now & Next, we review the latest research, provide impartial insight and analysis of current trends and provide predictions for the future of advertising and marketing technology: This feature focuses on Native Advertising. 

Ad blockers and disengagement an increasing problem

Globally, ad blocker usage is projected to grow 41% year-on-year, costing publishers an estimated USD$22bn in 2015, according to PageFair’s ‘2015 Ad Blocking Report.’ Ad blocking, and consumer disengagement with advertising is an increasing problem for advertisers, with the Reuters Digital News Report finding over 30% of consumers in the UK actively avoid sites where traditional banner advertising interferes with browsing the site.

Native advertising offers a more subtle way for marketers to target ads to consumers, blurring the line between content and curated adverts. The IAB has highlighted six core ad types which fall under the native banner: In-feed units, paid-search units, recommendation widgets, promoted listings, standard ads containing native ad units, and custom native advertising.

In the UK, native ad spend now accounts for 14.7% of all digital ad spend, up 5.5% year-on-year, figures from Adyoulike & FaR reveal. In the US, native ad spend is projected to reach USD$7.5bn in 2015, up from USD$4.7bn in 2013, according to figures from Business Insider. Nearly seven in ten marketers (69%) believe that native is a valuable advertising medium, according to Native Advertising Technology Study.

Native increasingly popular

Kenshoo recently revealed that native ad spend on Facebook has seen a 114% year-on-year growth, with 63% of native ad spend now being spent on mobile. Although Instagram has only recently launched it’s self-serve native ad offering, projected ad sales for 2017 stand at USD$2.81bn.

Globally, the majority of consumers highlight that relevant ad content is the main thing they seek from advertising (Brazil 88%, China 77%, UK 59%, US 56%), according to PWC’s ‘Consumer Intelligence Survey’. The report revealed that consumers in the UK and the US preferred not to see any targeted content on mobile as they felt that mobile advertising was intrusive; native advertising allows brands to create content that is displayed in a less intrusive way to consumers.

Is native more engaging to consumers?

A recent Yahoo eye-tracking study revealed that 85% of consumers remained visually engaged with a content stream that contained native advertising, 21% more than other types of visual advertising. Over 60% (62%) of respondents in the study stated that they think native advertising is less intrusive than other forms of advertising.

Consumers who view native advertising on mobile are 19% more likely to recall the content of an ad compared to display advertising, with the figure 13% higher on desktop-viewed native ads.

The average dwell time on native advertising is double that of other advertising formats (140 seconds versus 70 seconds), according to research by Adyoulike. Average dwell time on sponsored content is 68 seconds. Consumers are more likely to look at native content than original content (26% versus 24%), according to research by Sharethrough Inc.  

Adyoulike found that the majority (63%) of 18-24 year olds actively seek out sponsored content, with 44% stating that sponsored content added value to entertainment pieces. Nearly half of consumers believe that native advertising enhances overall website experience for business and entertainment content, according to a recent IAB study.

The report found nine-in-ten consumers state that relevant content is the most important factor to drawing interest to a piece of native content, with sites receiving a 58% uplift in favourability based on this.

Netflix launched a seminal native advertising campaign on the New York Times website, focusing on the plight of Women Inmates in US prisons to advertise the show Orange is the New Black.

Consumers view native positively

Millennials have grown up within an increasingly interconnected society, seeing a rise in the Internet of Things (IoT). Within the UK, a record 91% of millennials now own a smartphone (comScore), in the US this figure is 85%, according to figures released by Nielsen.

A recent Yahoo study found that the majority of consumers (58%) believe that native advertising was the best advertising medium for mobile. There are a number of reasons why consumers believe native advertising is better than traditional ads including: Its less intrusive nature (55%), it sits better within the content on the website (51%), and, crucially, consumers believe that it is more in-keeping with how consumers use the internet on their smartphone (41%).

In the US, Facebook remains the dominant social media platform for millennials, with 57% using it daily, figures from the American Press Institute show. YouTube is the second most popular new media platform, with 54% of millennials accessing it regularly. Over a quarter of millennials (26%) are using Instagram on a daily basis, whilst over 30% are using Twitter (34%), and Pinterest (35%) on a regular basis.  

Native content is more likely to be shared by consumers than banner advertising (32% versus 19%), according to research by ShareThrough. However, this finding may be due to the ease with which both advertising mediums can be shared.

The Future of Native

Ad spend on native advertising is projected to rise to USD$21bn by 2018, according to figures released by Business Insider. Native advertising provides a less intrusive way for advertisers to target consumers on mobile.

Native drives higher engagement rates than traditional advertising, with consumers rating it their preferred advertising medium. Consumers are actively seeking out native content, and appreciate the value that high-quality relevant content can bring to their browsing experience. Native advertising is more likely to be shared by consumers, with nearly a third (32%) stating that they would share native advertising.

For advertisers, native advertising offers higher dwell time, and higher emotional engagement, whilst providing more subtle advertising for consumers. The increasing usage of ad blockers is pushing advertisers to think about the quality and relevance of their advertising to consumers and native advertising offers a subtle way to provide this to consumers.