In my recent crusade to learn more about native advertising, I noticed that there is a lot of uncertainty in what native advertising is and how it is executed. While it is clear that publishers have bought into native, how important it is for brands remains unclear. To learn more about the business of native advertising, how it is executed, and emerging trends, I reached out to a top thought leader in the space, Jesper Laursen.

Jesper is the founder and CEO of the Native Advertising Institute, one of the world’s leading knowledge hubs for publishers, brands and agencies wanting to succeed IN native advertising.

Alongside the NAI, Jesper founded three other companies in events, content, and journalism. Jesper is an international keynote speaker and each year his companies run several international conferences, masterclasses, and educational programs, as well as produce more than 12,000 pieces of content.

The following interview has been lightly edited for ease of reading.

India: Tell me about the Native Advertising Institute, why did you start it?

Jesper: We have one company working in the content marketing space and another company working in journalism. From the media side as well as the brand side, we saw native advertising emerging and evolving. Nobody knew how to do it, and neither did we. We figured that there was a need for a hub, a place where brands, media companies, and agencies could go to learn and share knowledge on how to be successful in native advertising.

The Native Advertising Institute is a knowledge hub, we gather and create knowledge about native advertising through research. About two months ago we launched the first global research on native advertising in the magazine industry. And we are about to launch the first ever global survey on native advertising in the news media industry.

We also have a blog with a lot of contributors from around the globe. We do events; our big annual event is coming up in November in Berlin. We had that last year in Copenhagen with people from 14 different countries. We have just launched the native advertising awards. Submissions came from all over the world including China, Russia, India, the US, etc. The winners will be announced at the event in Berlin.

The Ecosphere of Agencies and Media Partners is Changing

India: Based on the research that you have conducted and conversations that you are having, what is exciting in native advertising right now and moving into 2017?

Jesper: Overall, we are seeing native becoming more widely known and practiced. Something interesting is that media companies, big and small, are creating their own, in-house studios. In the magazine industry, 31% of all magazine publishers and 33% of news media companies have in-house native studios. That’s one in three, and a lot of those were created in the last year or two.

This is interesting for several reasons. One, of course, is if you look at it from a media publisher perspective, but it’s also fascinating from a brand perspective because that’s a new, very interesting breed of agencies. One of the things we’ve seen brands struggling with is finding good partners to work with. Their agency partners they usually work with, their media buying agencies, traditional advertising agencies, PR and so on, do not know how to create native advertising. But obviously, the publishers do, they know how to create great content for their audience. We are seeing more and more collaborations going on.

I think the media buying agencies and advertising agencies are struggling a little bit finding their position. That’s one of the really interesting things; the whole ecosystem of agencies and partners is changing. For instance, the New York Times just bought an influencer network. I’ve seen more and more media companies becoming media buying agencies; they purchase the distribution. It has several implications going forward.

Then, of course, there’s the whole social media thing. Native advertising can also mean when you pay LinkedIn or Facebook to distribute your content. And since that has increasingly become a pay-to-play game, I think social media marketing will eventually be native.

New Tools and Technologies Allow Brands to Publish On Their Own

India: While the publisher side of the industry is still settling and evolving, what does it look like on the brand side? If I’m a larger brand with budget, how would I go about finding the right publisher to tell my story and how do I find the right publisher to reach my ideal audience?

Jesper: There’s basically two ways to get into native advertising; one is as a replacement of your traditional advertising. You see that your traditional advertising isn’t working anymore, so you want to try something new, something different, which is valuable, relevant content, and you replace your traditional ads with that. In those projects, they tend to work more as they used to, with the same partners, media buying agencies, as with traditional.

The other way is through producing it themselves. We’ve seen the rapid growth of content marketing over the last five years, brands building their own audiences and actually executing on this themselves. Very few brands will produce ads or commercials themselves. If you want to build your own audience and you want to build reach faster than you can grow your own channels, you can go out and rent the eyeballs.

Those companies that are used to working with content can execute on their own. Look at social media, for example, they are increasingly providing knowledge of how to do it. Like LinkedIn has “The Sophisticated Marketer’s Guide to Content Marketing,” Twitter has Flight School, and Facebook is giving you more and more tools.

There are also these new interesting tech companies emerging, like Storify or One Spot. Those are platforms where you can buy reach through networks, like Outbrain, so you don’t have to have like, twenty different publishers or networks you’re working with – you’re doing it all in one place. That’s a relatively new phenomenon that we’re seeing.

Budgets Are Shifting From Content Production to Content Distribution

India: Budget is important. Buying ad space on the New York Times is a significant move. Are you seeing more budget allocated and how much budget should brands be allocating to native advertising?

Jesper: That all depends on what you’re trying to achieve. Whenever we see one-offs or very very short campaigns, they usually don’t work. Native advertising is, more often than not, top of the funnel stuff, it’s not tactical, it doesn’t move sales quickly. Same with content marketing, it’s about building a relationship, it’s about building credibility with the target audience, and that takes time. You’ll succeed more with traditional ads if you want tactical messaging.

Depends on how much budget you want to allocate. Traditionally with content marketing, the ratio, production versus distribution, you’re spending way more money on producing the content and much less on distributing it. But when you look at a commercial for example, you might spend $1 making it for every $5 you spend distributing it. I think what we are going to see more and more of is less money being put into the production of it and more money being put in the distribution of it.

There’s no silver bullet in terms of how big a budget you should have, but the way you allocate the budget that you have is shifting more and more toward distribution.

Publishers Are Placing Big Bets on Native Advertising Revenue

India: Publishers are apparently placing big bets on the revenue generated by native advertising if 31-33% of them are creating in-house studios. Moving into 2017, how much are publishers relying on native advertising for advertising dollars?

Jesper: This is included in our research on the magazine industry and on news and media that we are about to release. For magazines, from overall advertising revenue in 2015, 19% on average came from native advertising, and in 2018, they predict that 33% of the overall ad revenue will come from native advertising. If you look at news media, in 2015 it was 11%, and in 2018 they are expecting it to be 25%. So that’s more than doubling the percentage of their overall ad revenues that come from native advertising.

India: If publishers are expecting to see revenue growth from native advertising, for this to be successful, brands also need to see growth, they need to see the value. What value are brands getting from native advertising, what kind of success are they seeing?

Jesper: Some brands are definitely seeing value. I think still there will continue to be that, but the old credo of “half of the marketing doesn’t work, we just don’t know which half, so we better keep doing it all,” also goes for native advertising to some extent. You can see people clicking the content; maybe you’re seeing a lift in brand awareness but you can’t really see any tangible business result. A lot of brands settle for that and probably will have to settle for that for awhile.

It does depend very much on what you are trying to achieve. There are things that native advertising can do for you, and there are things that certain publishers can do for you, and there are things that they can not do. The whole predicament is that media is so desperate for revenues that they will sell you anything even though if they are looking long term, there are some projects that they should probably say no. They New York Times has the luxury of being able to say no. What we are seeing is a lot of really, really bad native advertising, stuff that is not native advertising, it’s advertorials, sales messages dressed up as an article. That doesn’t work very well.

There’s still this notion among brands that if they can, they’ll just use it as a way to trick people into giving them their attention. That’s a very short-sighted tactic because the audience is smart and they are used to getting good stuff, and if you give them crap, they’ll punish the brand and the publisher, and both of them just wasted their time.

The Importance of Quality and Disclosure

India: Can you provide an example of good native advertising?

Jesper: I subscribe to a print magazine on cooking, I like cooking, it had one of my earliest memories of native advertising. In the same magazine, there were two different kinds of native. One was a page on rum; it said ‘rum is the new black,’ which was kind of weird cause it had been for a couple of years. I think it’s interesting, but there’s only that one page, and it had three bottles from the same company. I thought that was weird, I thought it was the first page for a theme on rum. Then I noticed there was a small ad on the corner of the page. I got pissed off both at the publisher and the brand because they just wasted my time. They gave me something without any value.

Later in the same magazine, there was this dairy company selling butter, among other things. There were three pages with really good baking recipes. Those had real value to me; the recipes were just as good as any of the other recipes in the magazine, and I felt positive towards the magazine for giving me that, even though it was sponsored content. I was positive toward the brand because it gave me something of real value. There were two different experiences in the same magazine, and it made me feel and act in two very different ways as a consumer. I think that kind of sums up both the opportunities and the pitfalls for everybody involved in native advertising.

It also ties to the issue of disclosure. There is a huge problem around disclosure, and our research shows that. Of the magazine companies, 11% do not label native advertising at all and in the news media industry, it’s 7%. Of the new media companies that don’t disclose, 50% of the are from Europe and 30% are from the States.

In this particular case, in the cooking magazine, there was a big photo of the butter, it was very clear who the brand was. And that’s important for several reasons. One reason is that, as a reader, I don’t like feeling tricked. The other is if you, as a brand, want to monetize native advertising, I, as a reader, need to know who you are as a consumer. If I don’t know who you are, I won’t buy your butter. They didn’t do it in this ad, but what they could have done is driven me to a site with more recipes – they could have kept on working me if I wasn’t ready to buy their butter at first. They could say, “if you like this recipe, go check this out, we have 100 more recipes like it right over here.” That would be a way to start to monetize our relationship, and they can’t do that if there’s no label, if there’s nothing on it.