What’s Keeping Programmatic Native From Achieving Scale?

vitaly-pecherskiyData-Driven Thinking” is written by members of the media community and contains fresh ideas on the digital revolution in media.

Today’s column is written by Vitaly Pecherskiy, co-founder and chief operating officer at StackAdapt.

I see a massive disconnect between the buzz surrounding programmatic native and the reality.

In the past few years, we’ve seen the rapid adoption of programmatic buying in banner advertising. Although this technology-powered, automated way to buy and sell ads has started to make its way into native advertising, adoption has been much slower. I wouldn’t be surprised if we didn’t see a fundamental shift occur toward programmatic native until later this year – or next.

There are simply too many obstacles to conquer right now, including uncertainty over how programmatic native meshes with direct sales, the conflicting goals of brands and publishers and an alarming number of websites that still aren’t optimized for mobile.

The Publisher’s Dilemma

Nearly half of all digital ad revenue came from programmatic channels last year, according to eMarketer, a 137% increase over the year before. That’s absolutely massive.

Banner advertising has clearly reached its tipping point and it is no longer a way for publishers to sell off remnant inventory. Now nearly all publishers – 98.3% – sell ad inventory through programmatic channels.

The story is very different in the native advertising market. Even though about three-quarters of publishers offer native, very few sell it programmatically – or at least they don’t admit it.

Since publishers see native as an opportunity to offer new premium placements to direct advertisers, they still hold onto it. Many publishers say one of the biggest challenges in programmatic native advertising is the lack of premium publishers. Even though most native advertising exchanges have premium publishers onboard, the amount of inventory they sell through programmatic channels is small. This indicates the reluctance of premium publishers to openly sell native through programmatic.

Brands’ And Publishers’ Goals At Odds

Native ads are considered premium ad placements. Traditionally, publishers sell premium ad placements at a higher cost. Publishers see native advertising as an opportunity to offer new placements to direct advertisers. What I think many publishers haven’t fully realized yet is that advertisers now seek scale, which they can’t achieve by working with only a few select publishers.

And when data targeting comes into play, they need an even larger reach since every additional targeting criteria exponentially decreases the volume of impressions they can buy at any given time. It is simply too difficult for advertisers to relinquish for native all the advances in targeting and optimization they expect in banner and video advertising. Advertisers’ demands for ROI simply don’t justify the prices and scale individual publishers can offer.

Brands Need To Think About Engagement, Not Direct Response

In content-driven advertising – the “paid” channel of content marketing – the primary strategies are brand awareness and mid-funnel marketing. There are some very progressive brands, such as Intel and Master Card, that understand how to engage consumers with content at all stages of the purchase funnel, but the majority of brands are still trying to figure out how to get content to work in their favor. A natural response to a new strategy is to benchmark it against what is known – in this case, banner advertising. What brands haven’t fully embraced is that native advertising and content marketing should not be seen as performance channels, but rather as mid-funnel and awareness tactics that should be tracked and reported accordingly.

Responsive Web Design Not Widely Adopted

Mobile traffic surpassed desktop about a year ago. Yet it’s hard to pinpoint exactly what percentage of sites on the web are responsive or mobile-ready. Numbers typically range from 5% to about 10%. That means an overwhelming number of publisher and advertiser sites aren’t in any shape to deal with mobile visitors. On a non-mobile publisher’s site it would be equally as difficult to engage with native ad units as with banners. Advertisers that drive mobile users to a site that isn’t mobile-friendly waste that resource since engagement and conversion rates exponentially decrease on tiny screens.

Although programmatic native advertising holds a lot of promise and many find the programmatic approach to be appealing, it is safe to assume that it may take awhile until we see a really fundamental shift in the marketplace. That won’t happen until advertisers stop prioritizing direct response over content, native advertising holds its own alongside banner ads or until all players aggressively address ever-growing mobile traffic.

Follow Vitaly Pecherskiy (@vitalypecherski), StackAdapt (@StackAdapt) and AdExchanger (@adexchanger) on Twitter.

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