The search for new media business models is more complicated than ever, with many publishers struggling to monetize. For some, native advertising has become a top strategy. In fact, recent studies show native advertising may grow to $21 billion by 2018, up from $7.9 billion this year.
However, a key question for publishers looking to incorporate native is how to make it work. Navigating the tension between maximizing both yield and quality, in particular, is proving difficult.
The new trend is to build out a native advertising "revenue stack.” Here are the three elements most commonly seen in a publisher’s native stack:
Stack Element 1: Direct Sponsored Native Advertising
The most resource-intensive native advertising element, Direct Sponsored, is content created by a publisher on behalf of a brand. This is the most valuable revenue source since it’s custom-tailored for the publisher’s audience and represents the most seamless integration with the voice of the publication.
Direct Sponsored has seen steady growth as established media brands like the New York Times have joined their pure-play digital brethren in investing heavily in sponsored content studios. Publishers sell these sponsored posts or custom campaigns for anywhere from $15,000 to north of $100,000.
Stack Element 2: Direct Brand-Owned Native Advertising
The next element down the stack is Direct Brand-Owned, or content created by a brand that is distributed in a site’s feed via a direct deal with the publisher. For example, Intel has hundreds of blog posts on its Intel iQ site. In a Direct Brand-Owned model, Intel would work directly with a publisher — let’s say Forbes — to execute a native ad buy allowing Intel to place its posts directly in Forbes’ feed. These direct-sold native ad deals can bring CPMs of $50 or more.
This element can be the utility player of a revenue stack, since the vast stores of content being churned out by brands means that publishers can capture content marketing budgets without necessarily having to use their content creation team resources.
The increasing availability of SSPs that support native further enables the growth of this category by streamlining the ad ops workflow for brand content.
Stack Element 3: Third-Party Native Advertising
This category represents content demand that comes in through ad exchanges and networks.
This can be the cornerstone of a native stack, since it gives publishers both a revenue onramp while they build out their direct sales programs and a strong base to enable experimentation with existing top-funnel efforts.
With the programmatic native ecosystem taking shape, this category has significant potential for expansion as trading desks begin spending against brand content.
The Future for Native Advertising Is Bright
As these three elements show, a successful native revenue stack usually flows downward from Direct Sponsored to Third-Party, since publishers are always going to earn the highest rates and find the best content harmony by selling native programs themselves. What’s exciting about the developing native space, though, is that tech is giving publishers the tools to control content quality and relevance from third-party demand sources as well.
Looking beyond that, the key will be finding a flexible tech solution that allows development of a customized native revenue stack for today’s ecosystem while laying the foundation for a more sophisticated mix as the programmatic native market develops.