Reference no: EM133339306

Case Study: Digital native advertising is online advertising that matches the appearance and purpose of the content in which it is embedded. For example, the wedding website The Knot may feature sponsored articles about wedding gowns that consumers can purchase through the website. Consumers find this advertising useful because the content is likely to follow the website's topics and style. Nearly 73 percent of internet users who are familiar with native advertising believe it is equally or more effective than non-sponsored ads.

The effectiveness of this type of digital advertising is causing marketers to take notice. For instance, the marketing agency of The Wall Street Journal partnered with Starz to develop an article-complete with video clips and an interactive timeline-that features the economics of romantic relationships throughout history. The sponsored content helped market Starz's show The Girlfriend Experience, while the focus on economics was meant to interest The Wall Street Journal's business-savvy target market.

The increase in artificial intelligence (AI) technologies has the potential to improve the performance of native advertisements. AI tools can compile and analyze wide sets of data and to make a variety of reports, freeing up marketers' time and improving the speed at which ad performance can be optimized. For example, The Washington Post uses a news-writing bot called Heliograf to generate welcome messages on native advertisements for readers to personalize the content.

However, because the advertisements are meant to resemble the surrounding content, consumers might not always recognize that an article or advertisement is sponsored. One report claims that 71 percent of native advertising lacks sufficient transparency. The Federal Trade Commission (FTC) maintains that advertising must be distinguished from editorial content, but this line becomes blurred when the advertising resembles the content so closely. Industry self-regulatory guidelines are encouraging advertisers to label native ads as sponsored content to avoid confusion.

The FTC is still working toward establishing regulations that protect consumers. The FTC states: "Under the FTC Act, an act or practice is deceptive if there is a material misrepresentation or omission of information that is likely to mislead the consumer acting reasonably in the circumstances. A misrepresentation is a material that is likely to affect consumers' choices or conduct regarding an advertised product or the advertising for the product." When advertisers and publishers fail to make appropriate disclosures, not only can the FTC take action, but so can the Federal Communications Commission (FCC) under its Sponsorship ID Rule. This rule requires broadcast stations to make disclosures that identify any sponsors at the time of broadcasting. The FCC's reach includes radio, television, and video streaming. Recently, the FCC fined a U.S. television station operator $13.3 million for failing to disclose the sponsorship of a series of ads styled as news stories that aired more than 1,700 times.

Regulation on native advertising varies internationally. The Advertising Standards Authority (ASA) in the U.K. has developed regulations on digital advertising relatively recently and has followed in the footsteps of the FTC, stating that native advertising cannot be camouflaged. Outbrain, a digital marketing platform that specialized in sponsored website links, came under fire from the ASA for a native advertising campaign that the organization said failed to clearly identify itself as an advertisement. The Internet Advertising Bureau (IAB UK) recently released new guidelines for native advertising and other sponsored content on social media and in influencer marketing. The guidelines require advertisers to "provide consumers with visual cues, or verbal brand mentions in audio formats, so consumers immediately know that they're engaging with marketing content."

It is estimated that these ads will account for 74 percent of all ad revenue by 2021. Though it seems native advertising is here to stay, advertisers will need to focus on developing genuine content and publishers will need to make clear disclosures to build and maintain consumer trust. Ad blockers may also prove themselves to be a challenge. Ad blockers, such as AdBlock, allow consumers to filter out banner ads, video ads, pop-ups, and more. When these services block native advertisements, the reach of the ads will drop significantly. With the growth of this form of advertising, publishers will need to carefully balance core content with sponsored content to avoid oversaturation which may deter site visitors. Despite these challenges, the future of native advertising is bright.

Question: What are the advantages of using native advertising over traditional digital advertising?