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.
In a new report from BI Intelligence, we break out native ads into three categories: social native, native-style display, and sponsored content (also referred to as premium native). We provide forecasts for how revenues from these formats will grow over the next five years and look 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, we do not provide an overall native forecast. Finally we lay 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 $36 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.
The rise of native advertising has been a significant trend in the digital advertising landscape, reshaping the way brands connect with consumers online. Native ads seamlessly blend into the surrounding content, offering a non-disruptive and engaging advertising experience. As highlighted in the report from BI Intelligence, several key factors are driving the growth of native ads and shaping their future trajectory:
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Dominance of Social Platforms: Social media giants like Facebook, Instagram, Twitter, and Snapchat have been pivotal in popularizing native advertising. These platforms have integrated native ads seamlessly into users' feeds, leveraging the immersive nature of mobile experiences to drive ad engagement. As a result, social platforms continue to be major contributors to overall native ad spending.
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Programmatic Technologies: The advent of new programmatic technologies has facilitated the scalability of native advertising campaigns. Publishers and advertisers now have access to tools that streamline the creation, distribution, and optimization of native ads across various platforms and formats, fueling the rapid uptick in native ad revenue.
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Rise of Native Video Ads: Native video ads, particularly prevalent on social platforms, are emerging as a key driver of native ad revenue growth. Video content has proven to be highly engaging and effective in capturing users' attention, making it a valuable asset for brands looking to enhance their native advertising strategies.
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Sponsored Content: Sponsored content, characterized by its direct collaboration between publishers and brands, represents a rapidly growing segment within the native advertising landscape. While this format offers unparalleled authenticity and storytelling potential, its high production costs and limited inventory pose challenges for widespread adoption.
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Challenges and Opportunities: Despite its rapid growth, native advertising still faces challenges such as ad frequency and scalability issues. However, future opportunities abound, with emerging platforms like virtual reality, messaging apps, and connected TV presenting new avenues for native ad innovation and expansion.
Overall, native advertising is poised to continue its ascent as a dominant force in the digital advertising ecosystem. By leveraging innovative formats, technologies, and partnerships, brands and publishers can capitalize on the inherent advantages of native ads to create more meaningful connections with consumers in the digital age.
