Mike Harty, PowerLinks, co-founder, and ExchangeWire columnist, examines the latest IAB ad spend figures and the history of programmatic advertising, to demonstrate how publishers are leveraging native advertising to re-address the power dynamic between the buy- and the sell-side.

Earlier this month, the Interactive Advertising Bureau (IAB) released figures demonstrating that advertisers' spend on content and native advertising formats topped the half-a-billion pound mark (£509m) in the UK during the last calendar year. This represents a pivotal moment in the evolution of native advertising, as it now accounts for more than a fifth (22%) of all display ad spend.

The upward trajectory of the format is further highlighted by earlier figures released by the trade body which had established that £216m had been spent on the format during the first half of the year. Seasonality aside, a 35% growth spurt in six months represents a quickening rate of adoption.

I think we now stand firmly on the precipice of native going mainstream and there is no longer any doubt that 2015 is the year that native advertising comes of age. With native programmatic now standardised, I thoroughly expect the growth rate to increase.

However, what interests me more about the ‘native revolution’ is the diverse dynamics that are driving it, and more specifically how publishers are leveraging it to readdress a broken power dynamic brought about by programmatic display.

Native – premium publishers launch the sell-side ‘fightback’

If the programmatic display revolution was driven – and largely orchestrated – by the buy-side, native for me represents a sell-side revolution. Make no mistake, the rapid growth of this format has been driven by publishers, sell-side technologies and more latterly, sell-side platforms like Rubicon and Pubmatic. Native provides the toolkit for the premium publisher fightback, and I am going to use this column to try and illustrate this.

In my last column, I discussed how trade bodies including the Association of Online Publishers (AOP), IAB and ISBA (the trade org. representing marketers' interests), were (rightly) moving to bring standards into the practice.

Standards are required, and they’re more than justified, when set against the context of quickening adoption and greater ad spend. These sentiments are also held by other ExchangeWire contributors.

However, in the same piece I did add a caveat that this drive for regulation had to be tempered by maintaining the unique proposition posed by native ad placements. Quite simply, we can’t just take the rules of display advertising and then apply them to native. Native and display ads are fundamentally different.

The upside of this move though is that native programmatic is now here to stay. With buyers and sellers rushing to build to the RTB 2.3 specifications, we can expect a quickening of the rate of adoption from a wider and more diverse range of buyers and sellers.

Programmatic display was led by the buy side

There’s no doubt that the wider programmatic shift has been challenging for the sell-side. I believe that the sell-side’s adoption of the technology – and willingness to build their own technology - behind programmatic was too slow.

Programmatic was widely regarded as advantageous for the buy-side, providing more control, granularity and lower cost. On the opposite side of the ring was the poor publisher, now suffering from regressed CPMs and subsequently declining revenues.

However, look at what programmatic trading stands for – the efficient and fast fusion of data and inventory – and it becomes evident that the benefits should work both ways. At the very least, the impact of this massive change in media trading should have been more balanced.

However, the rapid adoption of the technology by the buy-side became self-fulfilling – as the buy-side rushed to adopt, the technology vendors naturally focussed their attention on delivering on the buyer’s needs.

A casual glimpse into the AppNexus app store reveals the buy-side bias. This is hardly surprising if the buyers were the most likely customers for these fledgling ad tech businesses, the ones building these apps.

In general, it felt like the buyers were on the front foot.

The advertising industry's holding groups (such as Publicis Groupe and WPP) quickly developed whole new programmatic trading divisions.

The agency trading desk (ATD) emerged - and then decentralised - so fast to the point where 'ATD' is almost a moot term. This pace of change remains rapid.

The agencies weren’t alone in creating trading desks. Emerging new ‘independent trading desks’ rushed to build businesses and then technology on top of platforms like AppNexus.

This new breed of programmatic trading desk saw companies like MediaIQ and Infectious Media invest serious money in building their own buy-side functionality.

It feels like publishers – and technologies representing them - were slower to build advanced functionality to meet their needs. Even the ubiquitous sell-side platform, designed with the publishers needs in mind, was comparatively much slower to emerge on mass.

Look at the emergence and number of companies in the display LUMAscape, and you’ll clearly see that the buy-side was catered to and solidified long before the sell-side. This fuelled the buy-side advantage in the programmatic arena.

In the ensuing years, SSPs have added buy-side functionality through 'programmatic direct' and Private Marketplaces, and publishers are increasingly forming co-ops like La Place Media and Pangaea, which provide some equilibrium between buyers and sellers; better late than never.

Native provides a chance to re-balance the power dynamic

From what I have observed (both from the figures released by the trade bodies, as well as anecdotally from well-placed sources) it is encouraging to see publishers are learning some of the lessons from programmatic display.

Publishers have wrestled with the challenges of transforming their businesses from print to digital. Just as it felt like progress was being made in these battles, mobile and tablet emerged to complicate matters further.

Display advertising – the defacto way of earning your money as a digital publisher – became a dinosaur in a rapidly emerging mobile-first world. Quite simply put, you couldn’t effectively crowbar a display ad onto a four-inch screen without harming user experience and ad performance.

With these fundamental challenges to be faced, it’s perhaps unsurprising that the parallel emergence of programmatic, which totally changed the way digital ads are bought and sold, posed its challenges for sellers.

However, native represents a chance for the sell-side to reverse this damage, taking more control over their destiny whilst delivering a much needed injection into the ‘P column’ on their P&Ls.

Reversing the technology gap

If in the past it could be argued that the technology was focussed more towards the needs of the buy-side, I would argue that native has emerged from the opposite direction.

This maybe signifies a changing attitude on the sell-side in the UK market, as illustrated by the emergence of European style publisher collectives. Publisher consortia initiatives such as Pangaea and the AOP premium publisher collective are barely weeks old and are still very much in their infancy –  but they maybe signify a new and changing attitude towards programmatic trading. Native will play its part here, but this is a wider programmatic solution built around technology and scale.

When it comes to native, the technology to date has been sell-side biased. The emergence of companies like ShareThrough, RespondHQ and Polar MediaVoice illustrate this. This time around, the big SSPs (Rubicon and Pubmatic) are ahead of the DSPs in adopting native.

This is perhaps illustrative of the sell-side challenges posed by trying to standardise inherently non-standard ad executions, but publishers have been the fuel behind this, and the ad-technology market is rushing to provide solutions to fit their needs. This represents a massive power pivot verses the early days of display.

In contrast to programmatic display advertising, the sell-side has been quick to come round to the benefits of native, and this time it’s the buy-side clamouring to come to terms with it. The buy-side are still trying to answer big and fundamental questions like 'where will native ad budgets come from?' and “how do we deal with infinite or responsive creative possibilities?” and “who creates the branded content?”, whilst the sell-side are steaming on ahead.

Contrasting native trading models

This time around, the sell-side are aided by a clear distinction in the execution of directly sold custom content campaigns verses programmatically traded native.

Premium publishers, with top-tier editorial teams, have a unique asset which creates a protected walled-garden for their direct native activity. Simply put, a trading desk is never going to have access to such an editorial asset, with the ability to elegantly match the editorial tone of a publication against the commercial needs of an advertiser.

This ability to match client KPIs against an inherent understanding of an audience adds a unique layer of value which niche authority publications are leveraging to drive considerable revenue lines. These big-branded content executions lend themselves perfectly towards branded storytelling, further aiding publishers in accessing lucrative branding budgets. These types of campaigns will be bought directly from publishers and created by editorial teams and content studios.

Publishers will deliver ads with programmatic platforms to engage specific audiences and amplify content, but the production will not come from trading desks or DSPs, and subsequently the premium quality, user experience and pricing of direct sold native is protected.

This opens up the opportunity to trade additional inventory programmatically, with much less fear of cannibalisation than in the display arena. It’s hard for direct sales to add unique value to a 300*250 middle page ad unit (MPU).

However, in native, programmatic can focus on what it does best, including leveraging context, audience and thus impression by impression trading, to deliver personal relevance. This marriage of context with personal relevance lends itself to performance marketing, further delineating the split between direct and programmatic native.

The open market for programmatic native will see budgets from video, content amplification, search marketing, data-enabled PR and more. These budgets are converging as buyers seek more engaging and responsive advertising opportunities; however, all of the above advertisers are looking for audiences to interact with an in-feed ad or to click to an advertiser destination. These experiences are clearly distinct from branded content campaigns, which keep audiences on the publisher site.

Publishers have leveraged native formats to readdress the power balance with the buy-side. Native direct sales are more clearly delineated against the programmatic revenue line, and their enthusiastic native adoption has led to the development of more advanced technologies to meet their needs.

Perhaps even more tellingly, publishers have finally cracked the enigma by finding a solution that lets them trade their mobile, tablet and desktop inventory as one agnostic package. For this reason alone – a genuine sell-side specific pain point – it is easy to see why the sellers are leading this charge. In doing so, native has brought the publisher back to the table, and has readdressed the advertiser/publisher power dynamics.

In his next column piece, Mike Harty will explore the challenges of balancing directly and programmatically sold native advertising strategies. Follow @Mike_Harty on Twitter.