Native Ads Resulting in Higher Brand Recognition and Click-through Rate,Study Finds

ANN ARBOR, MI — July 29, 2017.  A study conducted by Associate Professor of Marketing  Anocha Aribarg and Assistant Professor Eric Schwartz  at the University of Michigan,  found that Native ads can capture greater attention, resulting in higher brand recognition and click-through rate.

Recent developments in regulatory and industry practice have raised questions regarding native advertising’s ethics and efficacy. On the ethics end, the U.S. Federal Trade Commission (FTC) requires all advertisement disclosures be “clear and prominent,” and that rule applies to native formats as well.

The takeaway for native advertising is simple: “you must make clear that advertising is advertising” so that consumers do not confuse ads with editorial content. From the efficacy standpoint, some studies, sponsored by the advertising industry, claim that in-feed native advertising garners higher click-through rates than traditional display advertisings. But no academic research has provided direct empirical support for this claim. To date, studies have been limited to native ads in the search format (e.g., paid restaurant listings on Yelp, paid listings in Google search).

Although “search” and “in-feed” ads are related, the two formats of native ads are sufficiently different that any conclusions regarding search-based native advertising may not translate to in-feed advertising. In order to fill this research void, prof. Anocha Aribarg’s research focuses on the in-feed native format and aims to assess consumer responses to native ads, as compared to traditional display ads.

For their study, researchers used a multi-method approach to collect and examine data: an experiment with surveys of consumer experience with an online news website, an eye-tracking experiment of participants browsing different versions of a live navigable news site and a field experiment with a business-news publisher with over 125,000 newsletter subscribers. According to scientists focusing on four key metrics – click-through rate, brand recognition, confusion, and evaluation of overall experience – contributes to internal and external validity.

Display and small native ads used as stimuli for “Consumer Responses to Native Advertising” study

Observational data alone is inadequate to compare the effectiveness of native ads to that of display ads or different formats of native ads because advertisers typically do not advertise in a randomized manner across multiple formats in the same campaign using comparable ad stimuli. But randomized lab and field experiments facilitate these comparisons. The attention and browsing measures from eye-tracking data shed light on underlying process driving the effectiveness of native advertising.

Marketing scientists noted that one advantage of a native over a display ad is that its format is highly congruent with that of the surrounding content. According to the theory of association transfer based on feature similarity, native ads’ resemblance to credible editorial content may also bestow credibility to the ads.

In addition to format resemblance, native ads are presented in closer proximity to editorial content than display ads. However, researchers hypothesize that these two features of native ads—format resemblance and proximity—could draw more consumer attention to native ads and, as a result, help them generate higher click-through rates and brand recognition than display ads.

“Our results showcase the superior performance of native over display ads in generating higher click-through rate and brand recognition. Native ads can draw more attention from consumers as they benefit from attention carry-over due to their resemblance and proximity to editorial content,” – concluded scientists.

Professor Anocha Aribarg and Assistant Professor Eric Schwartz noted that there are regulatory and economic questions surrounding the native advertising industry. Due to concerns about deception, the regulation of native ads’ disclosures is the focus of the FTC’s efforts.

According to its FTC guidelines, a disclosure’s adequacy is measured by whether reasonable consumers perceive the ad as advertising; “only disclosures that consumers notice, process, and understand can be effective.”  The Federal Trade Commission clarifies “how to make clear and prominent disclosures in native advertising” by specifying proximity and placement, prominence, and clarity of meaning as the keys.

“Our findings suggest that using highly prominent disclosure, featuring the brand name and logo in the native ad, to generate brand awareness is a win-win strategy that is aligned well with the FTC guidelines,” – say the authors of the latest study.

At the same time as these legal and ethical concerns, there is growing managerial need to understand the economic prospects of native ads. While technology has expanded advertising capabilities, other technology trends threaten advertising revenue.

More consumers than ever use online ad blocking tools, with 26% of U.S. users in 2017 employing the software on their desktop devices and over 300 million users have adopted a popular ad blocking software on mobile devices by 2016. In response, advertisers seek forms of promotion that will not be blocked, one solution, in some forms, is native advertising.

Such a managerial concern is motivating researchers to compare the effectiveness of native ads compared to traditional display ads. Using eye-tracking data, scientists also examine attention as a mechanism to drive the effectiveness of native advertising.

In 2017, native advertising saw the biggest growth in ad buyers  — a finding that conforms with the latest research. “The number of ad buyers purchasing native ads increase 74% YoY in Q1 2017, the largest increase of any ad format measured. Native ad formats outperform traditional ad units, and even though they’re more expensive, they garner higher click-through rates,” – Kevin Gallagher, research analyst at BI Intelligence , wrote in Business Insider.


Data sourced from “Consumer Responses to Native Advertising” ,Social Science Research Network; additional content by staff

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