Heed the signs: Digital advertising is undergoing a massive transformation
From the outside looking in, native seems to be more of the same when it comes to the evolution of digital advertising: a new category that is quickly becoming noisy and crowded. I’m often asked, usually by venture capitalists (VCs), “Who are the major players in ‘native’?”
Justin Choi
This question assumes native is simply the next iteration in the long evolution of digital advertising categories: banners, search ads, pre-roll, content recommendation, mobile, and now, native.
But what’s happening now is bigger than ‘native.’ This narrow focus on a specific trend is leading VCs to miss the bigger trend: digital advertising is undergoing a transformation, not an evolution.
From rails to feeds: the prime real estate is moving
Today, content providers are reorganizing their site designs around the editorial feed. Publisher site redesigns are cutting back on display ads, and the next generation of media companies are skipping display altogether. Digital advertising is shifting from interruption on rails to engagement in feeds. And for those on the outside looking in, this change poses a sudden disruption to the $19.8bn display industry.
For VCs, the editorial feed represents a green field of investment opportunity, as it becomes the new center of interaction between brands and their consumers. But while many waving the native flag are just re-purposing display demand and technology, stay patient for the new wave of innovators that properly align the feed to content discovery.
Brands are shifting from advertising to content
Marketers now spend billions of dollars to create content (think white papers, website content, PR), and will spend billions more as TV and print advertising shifts focus towards digital content such as brand generated articles, long-form videos and infographics. Recent conversations with brand CMOs all indicate they will invest significantly into content.
This shift is creating significant opportunities in marketing technology (MarTech). Ajay Agarwal, managing director at Bain Capital, predicts the first $10bn-plus marketing tech company will emerge and Ashu Garg, general partner at Foundation Capital estimates that MarTech spending will increase tenfold over the next 10 years to a $120bn.
The new ecosystem of content players has already backed innovators such as NewsCred, Contently, Percolate, and SimpleReach to support content creation, content workflow management and social measurement. Additionally, agencies are seeking new solutions to expand their value proposition and publishers are building brand content studios to grab more content advertising dollars.
As brand-created content becomes ubiquitous, massive opportunities will form for companies and investors.
Attention: The new currency of digital advertising
Once brands have content, the next challenge they face is discovery. This is where feeds and content come together – content distributed natively into feeds is a great way to drive discovery, provided distribution can be done at scale with automation. And since the new medium for consumer engagement is content, the currency we use to measure success must also align. That currency of the future is attention.
To date, the entire digital advertising industry has been built on clicks, but clicks require marketers to deliver an interruptive user experience. This strategy is at odds with publisher goals and one that’s driven users to revolt by installing ad-blocking software. Instead of squeezing blood out of a rock and trying to further the Internet as a giant interruptive direct response machine, the larger green field opportunity is to optimize for content and attention.
Why have advertisers kept branding dollars on TV and in print? Because to date, web advertising has not offered good options for delivering branding. But now, content advertising is providing that solution. It’s only a matter of time before branding dollars flow generously online.
Justin Choi is CEO at Nativo