Note To The Valley: Your Newly-Found Native Advertising "Solution" Won't Scale To Multi-Billion Exit

If you believe the endless tech blog propaganda and inside commentary coming from the Valley, then the display advertising apocalypse will soon be upon us. Standard display will be banished to the confines of ad tech history – with terms such as “IAB formats”, “ad serving” will soon invoke the same kind of nostalgia as the “walkman”. Display is dead. Long live, display. Now let’s make way for the “future ad” model that is going to win all that brand budget that’s been sitting in the offline world, namely native advertising. Has native come to free us from the shackles of the standard ad unit?

Native advertising refers to ad models that are natively designed to be part of the environment they are hosted in. Facebook you could say was the first native ad model. But whether you buy into native or standard, it is still the same thing – yes, advertising.

This presents somewhat of a backtrack for a lot of these next gen social utility/platforms. To date, the likes of Tumblr have maintained that they are not interested in advertising, that monetising their sites with ads was never going to happen. The truth is, on some level, these companies hate advertising. Well, unfortunately people, VC’s love money. And therein lies the rub.

The Valley entrepreneurs of tomorrow (and to some extent those residing in hubs such as Shoreditch, Berlin et al) are quickly beoming accustomed to the real world of business principles. If you take on boat loads of investment, the people investing inevitably want to see a return. The desktop web model is still underpinned by advertising. These young founders need to get the message: you need advertising to survive.

It is inevitable that we will soon start seeing more and more closed network ad solutions. Many more Facebook marketplaces. You have to ask whether the industry will let this happen. Does this present too many challenges to gain critical mass?

A basic argument will be scale. How do you scale multiple numbers of siloed workflows when executing an ad campaign. The savvy amongst you will inevitably beat the drum of the social API platform specialists such as the Glow Machine and Adaptly. That the next natural evolution for these companies is streamlining the workflow to execute across multiple networks. Is this a realistic, viable solution? When you talk about scaling, it is not unfair to say that industry has failed to scale the execution of existing formats (rich media, video, mobile), what happens when you add another lengthy list of non standard ad specs, non standard implementation protocols?

We also must touch upon the viability of sustaining budget investment from major brands over the long term. We’ve already seen GM pull out of Facebook. They have their reasons. ExchangeWire won’t add anymore unnecessary speculation around why they made such a strategic move. Can you really expect other social platforms (which in some cases are dwarfed by Facebook’s huge reach) to rival Facebook? Maybe it’s a matter of time. Once you reach 70% of an audience, maybe an advertiser and its agency must accept it will need to customise process and workflow. Will this be replicated across every new social platform that emerges? It is unlikely.

The subject of data unification is one not to overlook. The trend currently is moving to a multi-device, multi-connected trading landscape. Data becomes completely interoperable and marketers finally are able to have every digitised channel communicate to one another, most likely in real-time. The growth of the native opportunity could make this unachievable. Facebook operates a walled garden. It is likely to do the same when it launches the offsite audience-driven network.

In a world where marketers are still frustrated with the lack of digital data unification, you have to believe that native advertising only exasperates the problem.

This is not to say that native advertising won’t build necessary momentum. Ad models live and die by their effectiveness at fulfilling marketer’s objectives. While fears linger around the efficacy of standard digital display advertising, maybe this is where native has a chance to disrupt and scale. If the ad formats are tuned to the environment and they resonate better with the end user, then budgets could flow in that direction regardless of the data openness problem.

Advertising will always continue to be the internet’s currency. Time will tell whether it is delivered in an open or closed network model. Display can and will evolve, but the much-touted native advertising is certainly not going to replace it. And it certainly won’t be be the silver bullet for monetising these outrageously priced social media companies coming out of the valley and elsewhere.