5 min read

What is Native Advertising?

Sarah Wheeler
Sarah Wheeler
Updated on
October 12, 2021
Intro to Ad Serving

More and more sites are moving towards native ads instead of avoiding site monetization or relying on annoying pop-up ads. But what is native advertising? Why are it appearing online and in apps?

In this article, we define native advertising and discuss how these ad types can monetize your website/app experience.

What is native advertising, and who uses it?

Native advertising means integrating ads seamlessly into your feed, homepage, search results, and more. Often, these native ads look identical to your standard content, except with an added “sponsored” or “promoted” tag.

However, other industries are moving towards integrating native advertising into their sites/apps. WeTransfer (a file transfer service), for example, shows skin ads on their homepage. These promotions allow WeTransfer to monetize their free users without disrupting the user experience. Additionally, others — from fintech to marketplaces — have built native ad platforms for sponsored deals, promoted listings, and other featured content.

Klarna, for example, recently integrated sponsored brand ads into their mobile app, enabling advertisers to promote deals, products, and stores. The ads look identical to the organic content, except for the “Ad” tag. This provides Klarna with a new high-margin revenue stream, while still maintaining a user-friendly experience.

A gif with an example of native advertising

Native advertising isn't reserved for billion dollar companies, though. Even small companies implement it to drive additional revenue.

For instance, Chairish is a marketplace for buying and selling antique furniture. They created a new revenue stream by letting vendors promote their listings, similarly to Amazon’s and eBay’s ad platforms. These native ads appear simultaneously alongside organic search results.

Chairish Native Ad

Native ads don’t have to be rectangular ads that blend in either. Allrecipes, for example, displays sponsored ingredients from local grocery stores within its recipes.

Sponsored recipe listing

Why monetize with native advertising?

Programmatic ads are not the future of ad monetization, and native advertising verifiably drives revenue without hurting user experience.

As Facebook reported, native ads benefit both the publisher and advertiser:

  • Native ads have 200% higher CPMs than standard banner ads.
  • User engagement is 2x higher.
  • User retention is 3x.
  • In 2020, 63.2% of mobile display advertising was native, making up $53.4 billion in ad revenue.

While Facebook is unique in its size and data, the success of their native advertising business can’t be understated: as The New York Times [reports (https://www.nytimes.com/2021/07/28/business/facebook-q2-earnings.html), “Advertising revenue, which continues to be the bulk of Facebook’s income, rose 56 percent to $28.6 billion in Q2 2021.”

Facebook Ad Revenue

Similarly, Amazon reported $7.8B in their “other” category for Q2 of 2021, most of which is made up of ad revenue, like their native sponsored listings. They accounted for 3% of total US digital ad revenue in 2020, and the company is projected to take a higher share in 2021.

Ad Revenue Share

In other words, native advertising allows you to monetize your traffic without hurting the user experience. It’s a win-win-win. Advertisers love the more engaging ad units; users aren’t inundated with terrible programmatic ads; and you now have a high-margin revenue stream.

How do you integrate native advertising?

There are three ways to integrate native advertising into your platform: a homegrown ad product, a third-party ad server, or an ads API solution.

1. Building your own native ad server from scratch

Here, you’d build out a large tech team and design the ad product from scratch. By building it from the ground up, you have full control over its scope and vision. Facebook, Amazon, and Pinterest took this route.

Pinterest ads

You might consider building your own ad server if:
  • You want something that you own 100%.
  • You want control over what features are prioritized.
  • You don’t want to pay vendor fees.
You might think twice if:
  • You can’t wait years. Facebook, Amazon, and others took years to build out their ad platforms, which means no revenue in the meantime.
  • You don’t have the engineering resources. Building an ad platform from scratch requires many experienced engineers. This drains your resources and can be costly.

2. Third-party ad server or native ad network

Alternatively, you might consider a third-party ad solution, such as Google Ad Manager’s ad server or a “native” ad network like Outbrain or Taboola. All of these solutions will be client-side and involve JavaScript tags or in-app SDKs.

Taboola example

You might consider using a third-party ad solution if:
  • You need a fast launch time. Tag-based ad networks can be integrated in less than a day.
  • You need advertiser demand. Taboola, for instance, has built in advertisers willing to buy these “You May Like” spaces. And Criteo, a sponsored products ad network, brings retail advertisers with them.
You might think twice if:
  • You want truly native ads. Tag-based integrations and native ad networks require ad unit conformity. This may work for templated sponsored content boxes, but designing ads that fit into your site/app seamlessly is not possible with these solutions. They will always look slightly (or entirely) off.
  • You want control and customization. The advertisers and look of the ads is controlled by the third-party, not by you.
  • You want to avoid the pitfalls of tag-based ads. In the next section we dive further into what these issues are.

3. Ad APIs

The final option is building the ad platform yourself, but using ad APIs to speed up the time to launch, similar to building your communications solution on top of Twilio. With these tools, you integrate via APIs to get instant access to the building blocks you need to design a native ad product, including ad decisioning, tracking, targeting, management, and reporting.

You might consider using ad APIs if:
  • You want a native ad platform sooner than later. Using infrastructure APIs can cut down build time by 90%.
  • You don’t want to spend a fortune. Rather than paying engineers, server fees, and other expenses, these solutions charge a set SaaS fee.
  • You want truly native ads. Server-side ad requests allow you to integrate native ads that appears exactly like organic content.
You might think twice if:
  • You have no advertisers. Ad APIs generally provide the infrastructure, not the demand, so you’ll need existing advertiser relationships.
  • You want to launch a new platform in a few days. Some engineering resources are required, and it’ll likely take a few weeks.

Atom Tickets, for instance, uses Kevel’s ad APIs to insert skin ads into their homepage, creating a visually-appealing and non-invasive user experience.

Atom tickets example

Why Google Ad Manager and ad networks don’t work for native advertising

You may currently use Google Ad Manager (which has 90% of the ad server market) or be thinking about a third-party ad network like Outbrain, Sharethrough, AdBuff, Polymorph, or Criteo.

Criteo example

While these tools allow you to insert native-esque placements, they nonetheless are flawed because the integration is client-side and relies on JavaScript tags or bulky in-app SDKs.

Client-side ad serving involves inserting ad code directly onto the page/app. These tags then ping the ad tech vendor directly, who picks the winning ad and inserts it wherever the code was placed.

The alternative is a server-side integration, enabled by ad APIs. Server-side calls happen outside of the client, via a backend request. You post an API request and get a response containing the winning ad’s details, which you then parse and place directly into your site/app as it loads. No JavaScript ad tags are needed.

Server side

Ultimately, the benefits of server-side over client-side integrations include:

  1. Truly native ads: With a server-side integration, native advertising can be uniform with your existing content. You get to control and customize how the ads appear in your site and app. Client-side native ad networks, on the other hand, may share similarities with your content, but will never totally fit in. Below, for instance, is what Google calls a “native ad” powered by them. In reality, it’s just a banner ad that appears within a feed and doesn’t look like the other listings.

Google ad banner

Compare this to a truly native ad placement, like this promoted post from Imgur.

Imgur example

  1. Safety: Malware can infiltrate ad tags, and malware attacks cost publishers nearly $1B/year. With server-side solutions, there is no risk of malware, as there are no third-party codes on your site.
  2. Privacy: In a privacy-first world, you need to limit the third-party cookies on your site. Tags can drop cookies without your knowledge, but a server-side implementation ensures this won’t happen.
  3. Speed: Ad tags slow down website/app load times, negatively impacting the user satisfaction and causing attrition (14% of your audience will look elsewhere if your page loads slowly). Ad tags can take 500+ milliseconds to load, while the response time of server-side ad APIs can be as low as 35ms.

Abandonment rate
  1. Avoid ad blocking: Ad blockers recognize ad tags and shield them from users. This means nearly 30% of potential impressions never get filled, decreasing revenue from those visitors. Meanwhile, ad blockers have trouble recognizing server-side ads, as no ad tags are used, meaning you can monetize your ad block users.

Block users

Most third-party tools — like GAM and Outbrain/etc. — do not offer a server-side integration. If launching pseudo-native placements quickly is your goal, you can use these tools, but they aren’t advised if you want to build a full-featured, truly native ad product.

Instead, besides building the platform yourself from scratch, your best option is an ads API partner, who is server-side by default.

Is native advertising FTC compliant?

The United States’ FTC requires publishers to differentiate ads from organic content. Here’s a quick checklist to see if your native ads fit within FTC guidelines:

Are they distinguishable? In this WeTransfer example, the skin ad for American Express is obviously an ad, not standard content.

Did you provide disclosure? If the native ad is not distinguishable, is it labeled using non-ambiguous terms and without any blockage?

For more information, see our article on FTC native ad compliance.

How much can I make from native advertising?

The native advertising sector is expected to be worth $400B by 2025. Advertisers are increasing their native ad budgets, hoping to capitalize on the higher engagement rates of these ad units. Now is the time to build an ad platform that supports this.

Your ad revenue is dependent on many factors, including your traffic size, product, amount of ads, fill rate, etc. Below provides our analysis of average CPMs for various native ad units, as well as educated guesses on the CPMs that major ad platforms drive. (“CPM” stands for “cost-per-mille” and refers to the revenue you make for every 1,000 ad impressions).

Cost breakdown table

It should be noted that these values are all much higher than standard programmatic banner ads -- which can average $0.50 - $1.50 -- highlighting the great opportunity every publisher has in launching or switching to native advertising.

How to launch native advertising quickly

If you’re interested in launching native advertising — and don’t want to wait years — we’d love to chat. Kevel is the industry leader in ad APIs, and we’ve helped other brands like Klarna, WeTransfer, Slickdeals, and Ticketmaster integrate high-revenue native advertising in just weeks.

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