Native advertising: winners, losers and a lot of hype

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Session Name: The Future Of Native Advertising: Blurring Ads And Content

Speakers: Announcer Felix Salmon Lewis D’Vorkin Kyle Monson Jon Steinberg

Announcer 00:00

All right, tapestry. Who knew Carol King was in the app business? That’s a joke for the older folks [chuckles]. All right. Up next we have a power panel. It is The Future Of Native Advertising: Blurring Ads And Content. It’s moderated by Felix Salmon, they say he’s a Finance Blogger with Reuters, but we know he’s so much more. He’s going to be talking with Lewis D’Vorkin, Chief Product Officer for Forbes Media, Kyle Monson, Partner and Chief Creative at Knock Twice, and John Steinberg, President and COO of BuzzFeed. Please welcome the Native Advertising panel.

Felix Salmon 00:46

Hey, look at this. So, welcome to all of you guys. You don’t need introductions because you’ve just been introduced. We are talking about Native Advertising and I’ve been having conversations about this all day, which is great because that means I now know about it. I’m still a little bit unclear, as I’m sure most of us all are about what on Earth we’re talking about here. So, very quickly, I want to ask the three of you what we’re talking about? What is Native Advertising? I think everyone thinks it’s something different. Lew?

Lewis D’Vorkin 01:23

Its name, that’s been attached to a trend. That’s what the media business does, but I just view it as simply marketing messages that are part of the natural flow of the way a user or a reader or a viewer uses a product. To me, it’s that simple.

Felix Salmon 01:43

So would you consider a long copy print ad or a fashion ad in Vogue magazine to be Native Advertising?

Lewis D’Vorkin 01:53

Could be. It’s part of the way they use the magazine. Absolutely.

Jon Steinberg 01:57

I would say one of the original native digital ads was the sponsor result in Google, the sponsored result in Facebook, the promoted tweet in Twitter. A native ad is when you take kind of the functional unit of how the site operates and you make that into an ad product. Inside native units, you post branded content. So, I’d say branded content flows into native units.

Felix Salmon 02:21


Kyle Monson 02:22

I think that makes sense. I would define it as any kind of ad execution that uses the platform.

Felix Salmon 02:30

All right, Kyle. You have to leave now [chuckles].

Kyle Monson 02:31

Felix said we’re not allowed to say platform in this panel and I just broke his number one rule. Any ad execution that uses a platform as part of its construct, I think.

Felix Salmon 02:40

When people use the word platform, I get even more confused. You’re just explaining one piece of jargon with another piece of jargon [chuckles]. I was just talking to Jacob Weisberg out here. He was like, ” Every ad agency out there is sending me IOFPs saying, ‘we want to do native this, native that’, and this is new in the past six months”. So, why now? Is this some weird buzzy trendy thing where–

Jon Steinberg 03:10

No, I think these things take a long time. I think the banner has been a bad brand advertising product for 18 years. It’s been bad and ineffectual. It’s been solved for a bit because it’s so good for direct response advertising, which makes up a very small part of the overall market, but it’s easy to do it with banners, so people have rushed into that. Then I think that there have been a few people, us among them, Forbes among them, other people who have been successful in doing branded content right now and a lot of these brands have worked with us and seen it in the press and they realized all the metrics are there to evaluate it and see success. A lot of people are moving into it, even the Washington Post.

Lewis D’Vorkin 03:44

This has been going on for 10 or 15 years. The reality is that marketers for that long have been wanting to be seamlessly integrated into a digital product. I experienced this at AOL, and what happened was marketers all of a sudden had the ability to publish; digital tools enabled them to publish. So, once they had those they had micro-sites. They spent a lot of money with boxes and banners trying to get people to go to micro-sites, i. e. a corporate site or whatever. That didn’t work. BuzzFeed comes along, Forbes does its thing, and all of a sudden, you don’t have to spend a lot of money to reach and audience. We each have audiences, we each have tools, we each have ways that people can integrate their content. So, it’s a 10 or 15 year evolution to get to this point, in my mind.

Felix Salmon 04:28

So, what Jon’s saying is that you have been so massively successful at Forbes with educating the marketing world about this that now everyone wants all of the publications to–

Lewis D’Vorkin 04:46

I can’t speak to the industry at large. Maybe Jon can, but we’re finding that over the next three weeks, we’ll probably have about 15 or 16 simultaneous marketers who are publishing on I might add, we also do this in print too. It’s a viable formula in print as well, which is vastly different than the old model that was called an “advertorial”.

Felix Salmon 05:12

So, Kyle, you’re on the brand side of things.

Kyle Monson 05:15


Felix Salmon 05:16

You were sort of early to this game, but do you see now that you have a lot less selling to do than you used to have to do in the past?

Kyle Monson 05:27

Oh yeah, definitely. I started out four or five years ago. I was a journalist and an editor for various publications for a long time and then moved into the agency world. We were one of the first customers to help with Brand Voice on Forbes back in 2010 through a Microsoft campaign. We used to have to spend a lot of time explaining brand journalism, explaining the virtues of a great content campaign, and sort of the nitty gritty of content strategy. Now, clients tend to get that and we can skip that first hour long meeting and go into the actual strategy and the tactics that we’re going to use, which is great. For me, I think the native channel is sort of the latest channel that advertisers can grab onto as a new thing. Banners haven’t been working as well as they’d hoped. Content in general, the micro-sites idea didn’t really work quite as well as they’d hoped. The search engines are doing better about dealing with the SEO optimized content that they’ve been churning out for a long time. So, now they’ve got this new channel that they can use for their campaigns and we’re excited about it.

Felix Salmon 06:34

If I’m a brand, I have a wealth of different places I can put my content these days. I can pay Lew for a brand campaign, I can pay Jon for a BuzzFeed campaign, I can just create my own content and put it up on Tumblr or LinkedIn, on any number of other platforms that won’t even charge me anything. What’s the competitive advantage of publishers like Jon and Lew over stuff which I can do myself?

Jon Steinberg 07:06

I think that’s kind of a sticky question because there are a couple difficult assumptions around native advertising. The first one is that media partners can give us credibility that we can’t get on our own, that we can piggyback on the credibility of media partnerships with the audience. I don’t know if that’s true forever; I think that’s true right now.

Felix Salmon 07:35

Lew, is that what you’re selling? Are you selling the Forbes credibility?

Lewis D’Vorkin 07:38

I think we’re selling the ability to reach an engaged user in a credible news environment, for sure, if the marketer is authentic and original about what they’re presenting. I think we’re also offering the ability for that content to be organic and to be spread across the web, for sure.

Kyle Monson 08:01

I think part of the job – obviously on the advertising side and the brand side – we should actually be working to protect the credibility of our media partners because native ads can be shady sometimes. If we destroy the credibility of our media partners, that doesn’t help anyone.

Felix Salmon 08:19

Let’s name some names here. Give me an example of a shady native ad.

Kyle Monson 08:27

It gets picked on a bit, but Chef Boyardee did native ads on Food Network, which is a horrible deal for the Food Network. That’s way down market from where they should be playing. Do we agree, generally, that that’s kind of true? I think it is. It doesn’t do anyone any favors if they media partners we’re working with lose their credibility with their audience. We need to be working to protect that and we need to be putting together content that– if we’re working with BuzzFeed, can we create content that’s going to help BuzzFeed look great for their audience at the same time?

Jon Steinberg 09:06

The other thing is, I’d say we’ve employed almost an App Store model on this, which is, the reason why we have this team that works with media and creative agencies in the branch to create the content is, we want to keep the content at a high engaging level. We want to communicate the brand attributes and what the product does. We would never run something on BuzzFeed that says, “Buy this stuff now for $7. 99 or 10% APR financing”, we wouldn’t do that because the audience would hate it, they wouldn’t share it. So, in addition to offering the platform for brands to publish on, in addition to offering all the stats to optimize their content for sharing, we vet it to a certain extent. I think that that’s one of the things that we bring as well. We know what our audience likes and we prevent brands from putting content on the site that we know that the audience isn’t going to like.

Kyle Monson 09:46

You guys have a creative team that works on this, whereas a lot of the partnerships we’re working it’s agency creative, providing the publisher–

Jon Steinberg 09:52

It’s exactly like television. When the television network started out, no one knew how to do television commercials. So, all the networks rolled out internal teams to create television commercials for the brands. I think we’re at the same stage with content driven advertising. I think that, when I look a few years down the road, we’ll probably have the internal team working very closely with our top brands, but it will probably move more and more back to the creative agencies. We’ll be creating content directly on our platform, we may look at it and quickly vet it, just like the App Store, but then it will go live.

Felix Salmon 10:23

One of the things I hear a lot is that the in-house created teams generally perform much, much better than the material workshops created elsewhere. I hear that brands just can’t do this stuff. They have no idea what they’re doing.

Lewis D’Vorkin 10:44

There’s definitely an education process. The way Jon does it, we have what we’ve developed; a brand, a newsroom that reports up to the sales team, but the people on that team have the same skills as editors in some ways and data analysts and folks and they’re teaching them a way to do it right. What we’ve found is that, we guide them, we do many things, but the Brand Voice partners who actually have internal employees posting content really provide this authenticity that really resonates with the audience. So, you can teach people and you can bring people– they sometimes hire journalists to help them, but when some employees of the marketing company are actually doing it themselves, it’s really very powerful.

Jon Steinberg 11:34

We did that actually. The Microsoft campaign we ran with Brand Voice – I think it was called Ad Voice back then – it was for Microsoft and I went out and found my favorite IT journalists to write for it and we kind of dug deeper into the Microsoft ecosystem and got some of the engineers and got some of the developers to write for it, instead of just the corporate communications guys, to make it seems a little more real; to talk to these IT decision makers in their own language and things like that.

Felix Salmon 12:03

To go back to my other question, why is it better to do that on Forbes than it would be to do that on LinkedIn?

Lewis D’Vorkin 12:12

You want me to answer that question?

Kyle Monson 12:13

I think you should answer that question.

Lewis D’Vorkin 12:15

There is great stuff that happens on LinkedIn. They started an influencer program and I’m sure they have some folks and companies who are participating in that, but it’s a completely different environment. It’s not the type of environment where you also have a lot of real time news content, breaking news content, analyses of what’s going on. I think marketers want to be part of that real energy that comes from a breaking news media company providing context and analysis right at the moment on the hottest thing of the day. That’s vastly different than the kinds of things that can be published on LinkedIn at the moment. They could change.

Felix Salmon 13:05

Jon, I want to ask you about what people are buying when they buy one of your campaigns. If I go onto the BuzzFeed homepage, I’m going to see a bunch of headlines which are part of these native campaigns, and statistically speaking only 1-2% of the time I’m going to click on one of those headlines and I’m going to immerse myself in this beautiful list with cats or whatever it is. When I’m buying this, to what degree am I buying just showing that headline and that sponsorship thing to the hundred people who are going to see it? To what extent am I mainly just interested in the one or two people who are going to click and who are going to read it and immerse themselves?

Jon Steinberg 13:52

I think that’s a good question. First of all, a very small percentage of our branded content has cats in it. I would say only about 15% of the site and these are all random numbers [chuckles]. No, very small percentage of the branded content is cats. What you’re buying with us is an impression. The reason why we sell on impression is because of the $36 billion that’s spent in measured media online in the United States – other than the part that goes to Google – the rest basically goes to banners. It’s all served via double-click. So, we need to be able to be on an even playing field. With BuzzFeed, you’re buying a CPM that’s the same that you would buy if you were buying it on a banner, but it clicks through at 2-3%. So, it clicks through 20 to 30 times higher than what you would get with a banner for the same price. Then we are able to show you all the people that see your content and all the people that come to your content as a result of sharing activity. Finally, with Nielson, we’re able to ask people a question. We ask the people who don’t see the content, the people that are pushed to the content via paid, and the people that arrive at the content via social, we ask them a question like, “Is Virgin Mobile the carrier you would consider for your next phone?” “Are you interested in trying Taco Bell Loaded Grillers?” So, we basically have three levels of ROI proof point that this is a better product to buy than a banner. So, we measure it all those ways.

Felix Salmon 15:02

Banner advertising in dollar terms is still growing, right? It hasn’t died yet.

Jon Steinberg 15:08

Look at Yahoo earnings. They’re down 11% year over year there and they sold 7% less this quarter of display inventory than they sold this time last year.

Lewis D’Vorkin 15:18

Banner advertising is not going away. Some of the marketers use it to drive traffic to their Brand Voice posts. I think you use a little of that too, yeah?

Kyle Monson 15:29

What’s that?

Lewis D’Vorkin 15:29

Do you use banners to–

Kyle Monson 15:32


Lewis D’Vorkin 15:32

I thought you did on other sites.

Kyle Monson 15:34

No, we don’t use them anymore.

Lewis D’Vorkin 15:36

They’re not going away anytime soon. It’s all about using everything at your disposal.

Felix Salmon 15:45

But when you were ramping up, you’re like, “We want to buy some traffic”, and you did that by buying banners.

Kyle Monson 15:49

What we would do in addition– we still buy Facebook sponsored stories, we still buy tweets, we still buy Stumble Upon; it’s part of what we call Social Discovery, which is extending the campaigns into native units elsewhere. For a time when we were ramping up, we would create headline type units and put them into a display unit and pump it out there as a way of getting C Traffic, which we charge the advertiser for – there was a line item on their insertion order – it performed so poorly relative to the Facebook inventory and our own inventory that we migrated off of it. It was cheap, but it didn’t work well.

Felix Salmon 16:18

As a journalist, I need to ask, what is the danger that if all of these fuzzy incursions into stuff that feels like journalism is going to de-value the brands that we professional journalists work for? It didn’t happen in the end and I’m happy it didn’t happen, but there was briefly reported that Fortune Magazine was going to start selling its brand 250 to 500 thousand dollars a pop to marketers who wanted a Fortune article written about them. These are valuable brands and it’s easy to lose a reputation, right?

Kyle Monson 17:07

One of the compelling things about Native Advertising is people have stopped looking the sidebar. So, banner ads that live in the side bar and across the top, they’re not as effective anymore.

Felix Salmon 17:14

I look at the sidebar of the daily mail.

Kyle Monson 17:16

[chuckles] So, you’re taking your ads from the sidebar and putting them in the content well because no one’s looking there anymore. Well, what happens when they don’t want to look at the content well anymore? They’re going to find another site to read. I don’t know. I think once you invite Native Advertising onto your site, you are inviting better funded content creators to compete with the quality of your own content. I would love to hear your thoughts on that.

Lewis D’Vorkin 17:43

This is not a fuzzy line in my book. This is a bright, shiny line that’s being drawn here; certainly on Forbes. Let’s be real candid about this: any editor at any magazine over the last ten years has been confronted by the situation from a marketer saying, “You know what? I would really like to have contextual content in a department for my ad”, and the editor goes out and he assigns content to be written for a magazine so the ad can be placed adjacent to it. That editor has absolutely no– the marketer’s not going to influence that content, but that content may never have been done if the marketer didn’t want to be next to it. So, the user doesn’t know that. They don’t know that that story is in there because there’s an adjacency of an ad that the advertiser wants. When you have something like Brand Voice and Forbes, it is right there. Dell, Microsoft, SAP; they’re doing the story they want to do, fully identified, fully transparent, no editor involved what-so-ever. It’s a bright, shiny line.

Jon Steinberg 18:52

I completely agree with this. This whole confusion argument is basically a conspiracy put out by people who sell large banners, right? No one is confused by this. Everyone is writing an article that people are confused. It’s a bunch of journalists that are selling banners that like to say that regular people are confused. If you go to our homepage today, it’s bright yellow, it’s posted by Dunkin Donuts. The other one is bright yellow and it’s I think Jose Cuervo or some spirit’s brand. Nobody is confused by this. I find what’s abrasive to running a publication is the idea that you have some giant pushdown that disrupts what you’re trying to do, or some giant ad that moves out from the right or left. Somewhere along the line, in the past year, it became cool as a media company to have a terrible business. People like us that have good businesses became lame. I don’t know what’s so cool about having a bad business with a bad ad product–

Felix Salmon 19:40

Jon, I’ll tell you why people say that–

Jon Steinberg 19:46

People or journalists?

Felix Salmon 19:46

I used to actually produce advertorials for Euro Money magazine back in the dark ages and they were justified while the editorial wasn’t and they had the little different background color and they had the little thing at the top saying–

Jon Steinberg 20:07

And that made you feel better, right?

Felix Salmon 20:08

I just did what I was told. Everyone understood the more it looked like editorial, the happier the people paying for it were going to be. You wanted it to look and feel like editorial because that’s what was considered to have a certain amount of brand value that the brand of the publication would somehow rub off onto the content that was being put there, right? Native Advertising is an online digital version of advertorials, is it not?

Felix Salmon 20:44

No, not in my mind, because at least the way we do it, they typically hired an outside agency that went ahead and they did some research and they put this in the magazine, there was no engagement, there was no connection with the audience, they was no actual person whose face was on the screen saying, “I’ve done this”, and “This is what I think”. There was no way to engage with that piece of content as well. I think it is vastly different than that, and by the way, those things were places in ghettos that nobody really cared, and now you’re starting to integrate it like BuzzFeed and we are so that people can actually engage–

Jon Steinberg 21:27

And it’s not just about the brand, it’s about the users. It’s really about the users. The users like the native content clearly identified as such with a headline they may or may not choose. They do not like a giant welcome screen ad that they have to click back through. They do not like a pushdown. It’s more for the users. When we were young – when it was just Jonah and I and 12 people – and we couldn’t do this stuff, nothing would have been easier than for us to run disruptive display ads. People wanted us to do it. We didn’t do it because we thought it would kill the site and make the users unhappy. That’s the point that everybody misses. It’s as much about the users as it is about the brands.

Felix Salmon 21:55

Let me ask quickly about the ad agencies. The big ad agencies anyway, they make their money – most of it – by skimming off a certain amount of the money which is going to display ads. The other great thing about display ads is once you’ve made it, you can just run it as many billion times as you’d like and it’s really easy to do that. The marginal cost of doing this kind of native stuff is much higher. Even if it succeeds, they can’t then just sort of press a button and run it another billion times. This is much harder–

Jon Steinberg 22:30

I think it’s a nascent industry and I think first of all, right now all these campaigns have effectively an infinite scale by virtue of LinkedIn and Facebook and Twitter. You can take native content and you can basically achieve scale far beyond any kind of site that you’ve run it on. Then I would say, even without talking to Lewis, inevitably within the next year or 18 months, we will find some way to pass content back and forth. If a brand came to me tomorrow and they said, “We want to run this on Forbes and we want to run this on BuzzFeed”, we’d figure out a way to do it. We’ve already done similar things like that with Pepsi and whatnot on their own sites. Is it–

Felix Salmon 23:02

So it’s more native to BuzzFeed then if it’s appearing on BuzzFeed and Forbes at the same time?

Jon Steinberg 23:07

It can be branded content that runs natively into two different types of native units.

Lewis D’Vorkin 23:12

We’ll come up with a new term.

Jon Steinberg 23:12

What’s that?

Lewis D’Vorkin 23:14

I said we’ll come up with a new term.

Jon Steinberg 23:15

Yeah, exactly.

Lewis D’Vorkin 23:17

The point is a display add is a display add. You run the campaign, it’s gone pretty much forever. You take one of these pieces of content that’s written by a marketer. First of all, it’s consumed on the site. Secondly, it’s out there in the social world forever to be passed along and seen and is amazing. A good part of the traffic to is for old content that people just get to. It may be old to me, but it’s new to somebody else, and the marketers’ content is living on our site and in the social sphere forever and not going away. That’s a very scalable model, actually, compared to a display ad that’s there today and gone tomorrow.

Felix Salmon 24:00

So, this does seem to be if anyone’s getting disrupted here, it’s the middlemen of the display industry, who are also the ad agencies who are advising all of these brands on what to buy and how to buy it and what to do. Is this going to be a problem, in terms of getting the sort of outtake that a key stakeholder is actually kind of conflicted and part of the problem rather than part of the solution?

Jon Steinberg 24:34

90% of our revenue – or maybe it was 95% – last year came from media agencies. So, media agencies continue to be our biggest partner in all of this and they’re the ones that are assembling what’s going to run on our site, what’s going to run on other sites, what’s going to run out on Facebook, how is it all going to be consolidated for the end client? So, I see their place becoming more human and more valuable than ever. The creative agencies – and we’ll be rolling out some programs this year – are going to be involved even more in creating the content as we transition from this kind of one or two inning to the fourth or fifth inning, where creative agencies are playing more of a role in creating this type of social content. The only people that might be disrupted would be some of these programmatic exchanges to some extent. I think ultimately that would be a good thing. There was recently an article – I think it was in Ad Week – that said 25% of the inventory traded on exchanges at any given time is fraud or it’s not running where people think it’s running. The US government is taking ads from Mega Upload inadvertently on some of their sites. If that stuff were to get disrupted, I think that would be a good thing.

Felix Salmon 25:37

Kyle, are you an agent of disruption or are you just an old-fashioned marketer guy?

Kyle Monson 25:40

I don’t know. For me, I’m an agent of disruption, but even of the native ad model itself – because my company is split between content strategy and PR – and I would love actually your response to this, but part of the dirty little secret about Native Advertising – don’t tweet this I would recommend, because it’s going to disrupt your model too.

Jon Steinberg 26:05

It’s off the record for all 800 people in the room.

Kyle Monson 26:08

You can tweet it, but it’s in your best interest not to do so [chuckles]. If my client has a great story to tell, or something interesting to say, I can get it placed. That’s what PR does. We can call up a journalist and get it in the content well without having to pay for it. If they don’t have anything interesting to say, they shouldn’t be making content in the first place. Or maybe that’s when we turn to the creators over at BuzzFeed or a like-partner to help us come up with something interesting to say and a clever way to get it out. In that sense, there is kind of a disruption happening, I think. As PR folks get more savvy to that, they’ll start talking about how they can leverage their power to get into the content well.

Felix Salmon 26:48

I agree with that. When we first did this, the start-up company I had, we always thought one of the big– forget the ad agencies and the PR companies who didn’t have as many reporters to call up anymore – quite frankly – to get their message out. They need to change their ways too. So, as much as the agencies need to understand how to grapple with and BuzzFeed is teaching them, we need to work with PR companies as well to say, “Look, this is a great platform here. If you change your ways of doing things, you can reach an audience that you’re typically going to have trouble reaching”.

Felix Salmon 27:26

We’re running out of time here. I want to very quickly ask about the idea of buying placement of genuine editorial content; news stories. Is it kosher for a brand to come in and say, “We really like that news story, maybe our PR people worked with them. Can you please keep that news story higher up on your front page and somehow label that and make more people read it”. Is that a good idea or is that a bad idea?

Lewis D’Vorkin 27:57

We don’t do that, but it’s interesting what The New York Times is doing with Ricochet, where a company can have a feed and when it tweets a New York Times story, that company’s ads go on that page. That’s an interesting thing that’s going on.

Kyle Monson 28:18

We haven’t done it. We thought about what would it be like if a brand could use promotion clearly labeled as– if a movie, for example, had a great review and they wanted to promote that – and I think that this happens on some platforms, where you can buy that – I think it’s interesting. I don’t know what the labeling would be. I know there would have to be some kind of clear labeling and I think it’s something interesting to think through. I don’t have an answer for you.

Jon Steinberg 28:41

Are you talking about us – brands – spreading the good content that’s created by the journalists?

Felix Salmon 28:48


Jon Steinberg 28:49

There’s lots of curation platforms that allow that to happen, I think. That typically happens on things like micro-sites. It was a problem we ran into on Forbes where if Fortune writes something great about my client, they don’t really want us taking that and putting it on our Forbes micro-site. So, that’s something that we had to work through a little bit. You’ve got your social and your curation channels for that.

Felix Salmon 29:14

Channels, platforms–

Jon Steinberg 29:16

[chuckles] I’m sorry.

Felix Salmon 29:16

I’m telling you, it’s all jargon. We’ve run out of time, so you get to talk English now. Congratulations. Thank you all.