Google Builds Out Native Ad Solutions, As Smaller Players Gain Speed

Google Next NativeGiven the building momentum around native advertising and the growing number of publishers and startups seizing on the trend, it was only a matter of time before the 800-pound gorilla of ad technology threw its hat in the ring.

While Google has yet to formally introduce its native offering, numerous AdExchanger sources with knowledge of its plans say the company is taking a multi-pronged and deliberate approach to the native trend, stitching together multiple native ad offerings geared to different media sellers.

Among those solutions are ad-serving support for sponsored posts on premium publisher websites, and a content recommendation engine of the sort pioneered by Outbrain and Taboola, both of which may launch in 2015. None of AdExchanger’s sources (publishers and technologists, mostly) had a global view of Google’s plans for native, and some even contradicted each other. But taken together, they bring some clarity to Google’s development efforts around these non-standard creative formats.

Serving Sponsored Posts

For at least the past year, Google has been approaching top-tier publishers about a native ad-serving product it’s working on, sources say. The offering will help publishers manage custom sponsored placements produced by publishers’ in-house content studios.

These courtships haven’t been a complete secret. In June 2013, Forbes reported it had conducted tests of Google’s prototype native ad server. The publication ultimately went with other providers (it uses Polar and Sharethrough) because Google’s solution wasn’t yet fully baked. More recently Google partnered with BuzzFeed, building a native ad server that works with BuzzFeed’s proprietary content management system. Google publicly touted the solution as a way for BuzzFeed to serve and report on native ad placements, but declined to give AdExchanger further details about its plans.

Risks And Challenges

An inherent problem with native ad-serving is that units must be tailored to each publication. Distribution is often handled through a publication’s content management system (CMS). Advertisers that rely on centralized management and reporting for all digital media impressions can’t achieve scale. It was perhaps with this conflict in mind that Google began developing a CMS with ad serving baked in, which AdExchanger reported in May.

It makes sense that any native solution from Google should be able to work with Google’s own CMS or within a publisher’s preferred CMS, as in the case of publishers like BuzzFeed.

“There is a need for scalable and distribution-enabled CMS,” said one publisher aware of Google’s efforts in this space. If Google controls both the content management and the ad serving, that would simplify the process of native posts (and distribution), and expand Google’s reach even more. But it’s not clear that publishers want that.

While Google prepares to enter the market, other pure-play vendors have already built out exchange platforms for sponsored posts. Among them are Polar, Nativo, TripleLift, Distroscale and Sharethrough.

Going native is a necessity for Google.

“Right now the press and everyone is saying that display boxes and rectangles are bad. And that’s what Google does,” said Ryan McConville, SVP of publisher partnerships for mobile ad platform Kargo, whose capabilities include in-feed native advertising. “If everyone wants to do in-stream, in-feed advertising, and are using vendors like Nativo and Sharethrough, then Google needs to add that capability.”

Serving Native

But what capability or capabilities are we talking about, anyway?

DoubleClick for Publishers (DFP) already integrates with many standalone native ad-serving tools in the market. DFP does the decisioning, determines if a native ad should be served and handles targeting and segmentation. It will then call the native ad server, which pulls in the creative and renders it on the page. It’s similar to how DFP might call a rich-media server in order to provide complex creative.

Having that split affects reporting. DFP will offer simple results, summing up whether or not the ad is served. The native ad server supplies deeper engagement results, saying how long someone spent on a page or video and gauging engagement. Those are features Google might want to bring in-house as it develops its native product.

A Google native ad server addressing sponsored posts could be bad news for Polar. While its technology makes Polar an acquisition target, it could also be at risk if Google comes out with a competitive product.

“Polar is just the piping, and their biggest risk is being commoditized,” said Edward Kim, founder of the publisher social analytics tool SimpleReach. “The moment that Google says, ‘We have a solution that’s half the price of Polar,’ what’s the reason not to switch?”

That’s something Polar CEO Kunal Gupta refutes.

Polar is a Google partner, and Gupta believes the larger company’s native ad solution will not cover sponsored posts, putting it out of competition with Polar. There’s a reason Polar’s publisher solution doesn’t have a marketplace – publishers don’t want it. At least for sponsored posts, they value control over a network that would commoditize their inventory.

Google’s native solution, on the other hand, will undoubtedly support sales through programmatic channels. That puts it in the company of other native technology companies focused on building out marketplaces, like TripleLift, Nativo, Distroscale and Sharethrough.

Google has historically been strong with performance marketers, and the same could hold true for these new native solutions. Content recommendation engines have seen an influx of performance marketers, who often link to their own sponsored content. Not playing in a space favored by these marketers will hurt Google.

Little Native: Content Recommendation

Aside from its native ad serving ambitions, Google is working on a content recommendation engine, which one source estimated would be released in the first half of 2015. The solution may resemble or address in-stream native style placements, or those may be part of a separate solution Google is developing. Sources disagreed on this point.

In the content recommendation world, which is often lumped in with the native trend, Outbrain and Taboola have achieved impressive scale as independent players. Yahoo also just entered the market with Yahoo Recommends, AOL has Gravity and IAC has nRelate. There’s even talk that Facebook is working on such a solution. Google’s absence is notable.

The lack of a native solution is already impacting Google. “I know of one publisher that took AdSense completely off the page,” said Kim. The publisher opted for the “recommended” sponsored links from a content recommendation engine instead. “Google can’t sit by and watch that happen and not decide to build out those offerings quickly.”

Google has scale, but it’s moving slowly.

“Google has to build something for everyone,” said the CEO of one startup in the native space. “Smaller players can say, ‘This works well with 10 publishers,’ and kick things off. Google has to think about how things will work with 10,000 publishers.”

With content recommendation, Google would enter a market that’s already being commoditized.

“The game is getting aggressive,” said Kim. “It’s great for the publishers, but it creates margin compression for each of these players.” To compete, the current content recommendation engines have had to offer better deals to publishers, squeezing their margins. “If there’s a person that can subsidize growth more than anyone else, it’s Google.”

Excepting Google, Kim doesn’t expect to see many new entrants to the native market.

“If you’re not already at some degree of scale, you’re too late,” he said. “The game’s over. Now it’s only a game of who is going to be the winner.”

Gupta, however, said the twists and turns in the native game are far from over. “There is room for more innovation and disruption. That could come from existing players or new entrants.”

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