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Issue for November 2013

Native Advertising and Naïve Ambition

Posted on Friday, November 29, 2013 at 5:59 PM

Are you planning to cash in on the native advertising gold rush?

By William Dunkerley

They say there's a bonanza awaiting publishers from "native advertising." What is native advertising? It's the latest buzz term for what's long been called an advertorial - or, in plain English, advertising that's designed to look like editorial content. Native had its start in the online segment of the publishing business. Now, however, it's migrating to print as well. Some big names in publishing are now offering native advertising.

One study suggested that "85 percent of publishers believe native advertising represents a new revenue stream." It claims that "publishers expect revenues from native advertising to increase by approximately 10 percent with in [sic] a year."

Native Advertising in Russia

Proponents claim that the concept of native advertising arose because online advertising is "broken." I can agree that it is. But I haven't seen any research to validate the notion that paid editorial content is an effective way to advertise. Indeed, if it were, why didn't it play a far bigger role in print publishing long before now? Therefore, I strongly recommend that you remain skeptical about your chances of solving revenue shortfalls with native advertising.

The concept of paid content has actually been mainstream in Russia since the end of the Soviet Union. But it didn't arise from Russian publishers, like their Western online counterparts today, finding that existing advertising practices were ineffective. There had been no real advertising in Soviet times.

In the new Russia, there wasn't much of a need for advertising. Disposable income was low, there were shortages of many products, and the law didn't allow advertisers to write off advertising expenditures. On top of that, the percentage of advertising content publishers were allowed was limited by law to the extent that profitability was elusive, if not impossible.

Selling Influence

But there was a market for selling influence. It was considered influential to have a nice article appear about one's company or product or, for politicians, some favorable coverage of themselves. Likewise, it was thought that an unfavorable article about a competitor would be advantageous to the sponsor.

As a result, native advertising arose. Only the Russians didn't use a hard-to-understand euphemism for it. They plainly called it "hidden advertising." The law required that it be labeled as advertising, but that rarely happened.

After a few years, the sponsors of the hidden advertising came to realize that the publications were decidedly dependent upon the ads. They believed they could exercise better control if they became owners of the publishing companies. And so it came about. Business tycoons and politicians bought up the publishing companies. As one of the principals put it, "It was time that we legitimized our conjugal relationship."

Native Publishing in America

I'm not predicting that growth in native advertising is going to lead American publishers into lives of servitude under new owners in the same way. But I do caution you to take the hype about native advertising with a huge grain of salt.

The whole concept of native advertising is like a can of worms. AdWeek magazine raised the question of how publishers can pull it off without appearing to be selling out. That's a good question. The brand equity of any magazine rests in the trust readers have in its integrity and in its dedication to serving those readers. If a publication loses that, what will it have left? There are practical considerations, too. What does a print publication mailing as a periodical count as ad content? What if a publisher sells a product mention in a non-sponsored article? How does it count that?

The Editors Only Survey

Our sister publication, Editors Only (www.editorsonly.com), polled its readers about native advertising. The study was anecdotal, not statistical, but it was striking that well over three quarters of the editors reported that their publications do not carry native advertising. Even more striking is that of those that do carry, almost all expressed some form of negativity about the practice.

Editors at publications not offering native ads gave comments such as:

--My opinion of the practice is very low.

--We don't like native advertising, and we don't like it when ads look like articles.

--It's a major no-no because our readers see through it instantly.

This all adds up to a picture quite different from the rosy one painted by the native advertising hypesters.

Native Ads in the Online Advertising Landscape

Keep in mind that the impetus for native advertising came from the failure of online advertising to pay off. There's yet to be a format that is really successful. Banner ads have proven themselves to be ineffective; pop-ups and auto-start videos are extremely annoying. Moreover, technologies exist or are being developed to thwart them. Perhaps the push for native advertising is just another blind attempt to find a formula that works for advertising online.

The migration of native advertising to print doesn't seem to be any better thought out, either. It's another example of grasping at straws to regain revenues that were lost to the Great Recession. Last October, Advertising Age magazine reported that the Washington Post was starting to sell native ads. Now, there's a company with a proven track record of making bad publishing decisions. First it ran Newsweek (as owners) into the ground as a result of a series of extremely misguided moves. (See "Why Newsweek Magazine Failed.")

The Post had been losing far more money than Newsweek. And finally the company sold off the newspaper, too. Amazon's Jeff Bezos agreed to a deal in early August. He's been in control since October 1. I wonder if he'll follow through on the native ad plans. Maybe he'll find a way to make a go of it.

Why Are Native Ads Suddenly So Popular?

For now, I think we need to question why advertisers are gravitating toward ads that masquerade as editorial content in the first place. With no apparent evidence of native ads' efficacy, why do advertisers want them so much?

It could simply be just another blind attempt to find a formula that works for advertising online.

Another possibility is that advertisers may feel thwarted in their efforts to gain exposure for their points of view or to get their products covered editorially to a degree they consider sufficient. If that's the problem, editors need to recognize and deal with it.

Should we find ways to give greater legitimate editorial coverage to the views of advertisers? Do we need to feature more content that deals with products that are of significant interest to our readers? Food for thought: many readers actually consider ads to be part of the content that interests them in a magazine. Just last week, a publisher told me that click-throughs on some ads exceed those for much of the editorial content.

Dave Zola, executive news editor at WardsAuto World magazine, offered his thoughts: "As an editor, I realize that advertisers are looking for new ways to reach their audiences. I think we have to be open to them. Our own audience also is looking for multiple sources of information, including some things that our advertisers can bring."

If we're giving short shrift to legitimate editorial coverage of advertisers and their products, we may be inviting two unintended consequences. The first is that our readers may be getting shortchanged on content that interests them. The second is that we may be unwittingly stimulating the advertiser demand for native advertising.

It would be preferable to serve the advertisers with advertising opportunities that can be trusted to deliver results. I know that many publishers are still finding frustration as they try to regain lost ground in ad sales. But it would be far better to sharpen your sales strategies and skills to achieve your goals. For now, native advertising is an unproven idea, one with a lot of unanswered questions, and with a significant risk of unintended consequences.

William Dunkerley is principal of William Dunkerley Publishing Consultants, www.publishinghelp.com.

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Google Bigger Than Magazine, Newspaper Industries

Posted on Friday, November 29, 2013 at 5:57 PM

In the news: Google ad revenues have now surpassed the entire magazine and newspaper industries.

A recently BusinessInsider.com infographic is making a big splash. The bar graph, which shows ad revenues from 2004 to the present fiscal quarter, tracks ad revenues for the newspaper industry, the magazine industry, and Google. Until 2012, the numbers weren't particularly remarkable, but then Google ad revenues overtook both the magazine and newspaper industries in 2012 (and continued to do so in the first half of 2013).

MarketingPilgrim.com reacts to this with a certain measure of resignation: "One company is bigger than two separate industries? Why not? It's the Internet Age and all bets are off." Given the current trajectory, BusinessInsider.com predicts that "it won't be long now ... before Google not only eclipses magazines but also becomes bigger than magazines ever were -- even when there was no Internet to compete with." Read more about the data here and here.

Also Notable

The Real Digital Publishing Picture?

Is our understanding of the digital publishing landscape limited? D. B. Hubbard of TalkingNewMedia.com thinks so. First, Hubbard writes, "audit reports and publisher's statements reflect only a small portion of the digital publication universe -- and an increasingly shrinking portion." Not only is there a constant influx of new digital magazines into the newsstands, but many of the new entrants aren't yet audited.

Slowly but surely, Hubbard, writes, "replica editions" are cutting into print's share in the overall circulation. A chart in his article shows a meteoric climb in digital distribution since 2010 for six major magazines (including Cosmopolitan, Wired, and Vanity Fair). Read more of his analysis here.

"Ambidextrous" Magazine Publishing

A recent NPR piece discusses the success of The American Reader, a self-proclaimed "ambidextrous" print and digital literary magazine that features poetry, literary criticism, and fiction. Cofounder Uzoamaka Maduka discusses her philosophy on publishing, which revolves around the idea that today's readers still want in-depth, longer-form content. The magazine keeps its digital content behind a paywall and pays its writers so as not to "devalue" their work. Read more about the magazine here.

Forbes for Sale

According to various news outlets, Forbes Media (which publishes the nearly century-old Forbes magazine) is currently for sale. The company is expected to fetch roughly $400 million. Read more of the available details here and here.

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