The rise of native advertising

By October 23, 2014Advertising


There’s an interesting post up on Stratechery asking whether we are approaching Peak Google which features the graphic above. The central argument is that in the way IBM fought to protect their PC platform and missed the Windows opportunity and Microsoft fought to protect its Windows franchise and missed the web opportunity Google will fight to protect their search platform and miss the native advertising opportunity. Search is a c$50bn out of a total advertising market of c$450bn, and hence a winner in native advertising winner could be bigger than Google.

I’m a big believer in the increasing importance of native advertising. The best companies these days have interesting products and brands that lend themselves to this new medium. That said, I’m not sure that means another company will eclipse Google. Search always looked like it might have one major winner, but I don’t see the same network effects at play in native advertising which will find its audiences on the multiple content sites where they hang out.

  • Ronin_Jim

    I read this and found it’s premise intriguing but couldn’t buy into search vs native as the battle ground. This won’t happen because search which is best used by retail advertisers (the where and how much of ads) and native is best used by brand advertisers (the what and why of ads). Those two forms of advertising are non-substitutable. Native ads are not “better” than search because they do a completely different job, and they are used by customers in a completely different phase of their purchasing cycle. If we go to the days before the internet, retail and brand (analogous to search and native) peacefully coexisted on the same platform because advertisers needed both.

  • Ronin_Jim

    The only reason that search is so small as a share of the ad market is because big display ads on TV and other offline media are expensive to make and run.

  • True, but Windows serves a different function to PCs and search is in turn different to Windows. I think the point is that Google could stagnate and then decline whilst a native advertising juggernaut becomes everybody’s favourite new company. My problem with the analysis is that I don’t see why native advertising will spawn a juggernaut.

  • Michal

    Thanks for sharing Nic.
    However, I think the author operates under wrong premises and comes to wrong conclusions.

    1. His is a definition of native that is not widely shared. If a TV ad, a promoted Facebook post / Tweet / Pin is native, then practically everything is. In his notes at the bottom, he admits that with his definition, search ads themselves are native. He then backtracks by saying that search ads aren’t vehicles for brand advertising and therefore not native. This is a) wrong (just type “eyeliner” into google and see what happens) and b) again, a definition of native that practically noone subscribes to.

    2. Given this random definition, yes, Google will always be eclipsed by native. It already is today. Google’s share of the entire global advertising market IS small indeed – Google’s revenues were 60bn in 2013 and the global ad market is somewhere around 500bn.

    3. What the author in reality is saying is “Google doesn’t own the top of the marketing funnel so thoroughly as they own the bottom”. Driving awareness of products as opposed to leading to conversion. Well, that’s debatable. Look at a display lumascape – Google has a foothold in practically every category in it – from DSP to Ad Server to SSP and AdExchange. Noone so thoroughly permeates the display landscape as Google does, but it’s true, they are less dominant there than in search. But still a formidable player. And display is arguably the #1 vehicle for top-funnel advertising online, probably closely followed by video ads. And there, Google has Youtube.

    4. It’s wrong to assume that there must be another company that will eclipse google in the same way as they have eclipsed MSFT and these in turn have eclipsed IBM. There’s no good reason to assume that there will be one company that will do what the author calls “native” and that there’s economies of scale in having it all in one hand. “Native” as the author defines it, is a myriad of different formats, ranging from a promoted tweet to an advertorial to a superbowl ad. How could all this be done by one or two companies or what would be the benefit of having it done by one or two companies?

    There’s good reasons to assume that Google might be eclipsed one day – they still haven’t cracked social, and from my personal experience, they are growing complacent. But to point a finger at them and essentially blaming them for not owning TV advertising is a waste of e-ink.

  • Thanks Michal. We seem to reach the same conclusion that native advertising won’t be owned by one company, but I do think a broader definition of helps understand the scale of the opportunity. The point for me is that the ads need to be interesting enough to be consumed inline with other content, be that in magazines, on websites or in social feeds. If ads of that nature start to dominate and personalisation and targeting get good enough the role of search advertising at the bottom of the sales funnel might start to diminish. I’m not sure whether that sounds more or less improbable than the idea that browsers and web apps could replace Windows and MS Office did back in the late 1990s, but it’s definitely on the cards.

  • Thanks Kerry. Very interesting. I have huge respect for John Battelle but I rhino Google’s position is weaker than he does. I also think that the reason Google has so many moonshot projects is that Page is worried too.

  • This is another case of Jason and the Jargonauts making marketing seem more confusing than it needs to be. These terms are often refer to the same challenge. Native = Content Marketing = Relevance. Tell your story to explain how you can solve someone’s problem and you can make a sale. Put your story in front of them and make it tantalising. Demonstrate how you achieve success. IMO the native debate often neglects a more important shift. Big media is fragmenting fast – well crumbling actually. If you look at the rise of news channels like Buzzfeed, you start to see that people have largely become bored with long-form ‘content’ interrupted with advertising. We are ‘snacking’ and we are devouring UGC news. Native is simply a way for brands to stay involved. What has yet to surface is a better mechanic to discover valuable, unsullied information – one that’s owned by a reputable publisher. (Largely because reputable and publisher are often not easy bedfellows). Our editorial choices are destined to be much more driven by the wisdom of the crowds. Maybe mass media will die out.