Native Video Ads: Silicon Valley’s Shiny New Thing Or Industry Savior?

Editor's note: Charles Gabriel is vice president of sales for the AOL On Network. Follow him on Twitter @cgabriel10.

For anyone who's attended a conference on online media or advertising, or read any of the industry trades over the last six months, the phrase "native advertising" is all but inescapable. Originally coined by Fred Wilson, it's been evangelized into 2012's biggest buzzword. Its advocates point to Facebook's Sponsored Stories and Twitter's Promoted Tweets as well as experiments from the likes of Forbes and The Atlantic as evidence of the category's growing prominence. More recently, however, skepticism in the media and backlash from consumers has started to cast doubts about the native model.

In the video realm, the stakes for getting this right are particularly high. In contrast with display, video's production costs, and high barrier to engagement – particularly with click-to-play units – make the native promise a particularly attractive one. As more and more brands pump big budgets into branded content and entertainment, they're seeking placements that better fit their overall objectives (authentic engagement that transcends the traditional advertiser-consumer relationship) and deliver ROI on their campaign dollars.

So what needs to happen for native video ads to become a reality, rather than simply a Silicon Valley gimmick or a dressed-up advertorial? How can the medium overcome issues of scale and consumer mistrust? Here are four things that need to happen in order to move native advertising from the latest shiny object to a sustainable, long-term solution for video advertisers.

1. Upward Trend In Quality Content

A recent MediaBrix study found that many consumers find sponsored content on sites like Facebook and Twitter misleading, and that it can actually harm their perception of a brand. The study, unfortunately, did not delve into the specifics of the content itself – whether it was well-targeted, high-quality, and clearly identified as coming from an advertiser. My hunch is that these respondents would have replied differently if asked about native ads featuring content they found relevant, useful, or entertaining.

The bottom line is that user trust is essential for generating the engagement that the native ad model is founded upon. A sure-fire way to lose this is by allowing blatant advertorials or shoddy content into the mix. In order for native advertising to be viable, brands have to focus on maintaining a high standard for their content. In addition to high production value and utility for the user, videos shouldn't be overloaded with logos or other branding. And if the video is a product review or other how-to content, experts should be just that – experts – and not thinly veiled pitchmen.

2. Shift To CPV Model

While the CPM (cost per impression) model works for pre-rolls that play every time a page loads or a player is selected, it's an ineffective economy for click-to-play native ads. The CPV (cost per view) metric makes the native model work by ensuring that advertisers pay only for videos that are consumed by users who choose to watch them, and by offering publishers an incentive to run native ads that often change the architecture of their pages. Pricing can vary based on the type of guarantee (e.g. video start, percentage of video completed, etc.), but with a CPV model advertisers are much more likely to get what they pay for.

3. Entrance Of Big Players On The Publishing Side

One of the biggest problems with the current native video offerings is that they rely on middlemen who have to create custom integrations with publishers. As more companies like AOL, Yahoo and MSN that have a first point of distribution (properties they own and program) enter the scene, advertisers will be able to easily run native campaigns at scale across multiple sites.

4. Programmatic Buying For Native Formats

Like it or not, programmatic buying is reshaping online advertising as we know it, and by some estimates will account for as much as 90 percent of all ad buying in the future. While there are very few examples of native formats being bought this way currently, Facebook could help pave the way in the future by making their Sponsored Stories available via the Facebook Exchange (today only standard display ads are sold on the exchange). Native video placements, which would strip out some of the inefficiency and issues of scale, lend themselves well to this approach.

The intensity of the discussion around native ads shows no signs of slowing down, with more arguments for and against them cropping up every day. Whatever your stance on native, it's hard to deny that the goal at its very core (make online ads better, less intrusive, and more engaging for the user) is a worthwhile one. As advertisers start to experiment beyond the pre-roll, creating new and beautiful video content, they will start to demand placements that do those ads justice. For this reason alone, it's essential that the industry work together to make them a reality.

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