Native advertising not a panacea for publishers

By Jeff Jarvis, CUNY J-School professor

I’ve been waiting for this: the leak in the native advertising balloon. Tablets were going to save the news business. Not so much. Paywalls were our salvation, damnit. Nope. Native advertising is our future. Think again.

Digiday reports on the latest problem with the native advertising strategy:

Digital ad sales intelligence platform MediaRadar said the average renewal rate for sponsor content this year is 21 percent. Meanwhile, native ad tech company Polar recently described renewal rates as “weak,” with 40 percent of the publishers it surveyed showing renewal rates below 50 percent.

Native advertising isn’t going to cure all our problems because:

1. The ROI is debatable. Says Digiday: “Behind the low renewal rates is the fact that advertisers are uncertain about the return they’re getting on native advertising.” This has been my worst fear. We give the advertisers what our standards and ethics forever forbade — confusing our readers about the source of content — and then the advertisers wake up and say, ‘Well, that was fun. But we’re bored with that. What can you sell us next?’ Except with badly done native advertising, we’ve already sold our brands, our souls, our seed corn. We have nothing left. Jack, you gave away our only means of support for what? Magic beans?

I have long wondered whether native advertising would do what advertising is supposed to do: drive sales. What is the efficacy of replacing five-word banners with 500-word stories? Perhaps we are beginning to find out.

2. Competition is rushing in. Digiday: “Three years ago, there were about 15 companies helping brands produce sponsored content, according to MediaRadar CEO Todd Krizelman. Today, there are more than 600, and the number is growing.” I have long said that in media need to compete with creative agencies but we can’t imagine that they won’t fight back. Content is a commodity. Anybody can make it. That is the key lesson of the internet for media. So we surely couldn’t believe we’d hold onto the business of “telling brand’s stories” for long.

3. It’s expensive. It takes a lot of resources to make content for finicky advertisers.

4. It’s no longer enough to write a “brand’s story” and put in in our editorial space (barely camouflaging it as an ad). Media’s audience is insufficient. So media has to spend money (a) placing ads elsewhere to drive traffic to our native ads, (b) placing the native ads we make at other media sites, and © trying to buy social traffic. That, too, is expensive.

So what is the profit margin on native advertising after we are left marketing our services to replace the clients who churn out, after spending a fortune on making native advertising, and after spending another fortune advertising the advertising? Native ad distributor Polarsays it’s a high-margin business still and that’s good. But where do those trend-lines fall given the news above?

This is the moment where you say, “Goddamnit, Jarvis, you shoot down tablets, paywalls, and native advertising, not to mention programmatic advertising (because it commodifies media) so what do you expect us to do?”

Mind you, I am not against doing native advertising well. See Quartz, for example. I am in favor of media companies competing with ad agencies for both creative and media business. What I object to is the idea that this could have been our sole salvation, any more than our earlier magic beans, without embarking on the much harder work of reinventing ourselves.

Our only salvation will be to question *everything* about our mass-media business models as we enter a new reality, starting with the value of reach in an age of abundance and endless competition. Yes, reach matters but only if we have something of value to convert all those folks to. We have to shift from reach to relevance, volume to value. We have to rethink the essence of what news and media are. That’s why I wrote this: to begin questioning and exploring.

That’s also what I said to our incoming students at CUNY’s J-school last week. At the end of our week together, the students listened to voters about their needs in this election and their proposed solutions didn’t look like content-based mass media at all. They’re all journalists but they are learning to question their assumptions. We need to do the same with business people and reinvent what they do. Instead, we’re grabbing the deck chairs on the Titanic hoping they will act as flotation devices.

Contently  —  a reputable native advertising company (with whom we are doing a study at CUNY) just released some further data on media’s behavior: 68 percent of publishers have editorial staff make native advertising. Nooooo! 45 percent think the biggest threat to native advertising is the lack of separation between church and state. Jeesh.