In-feed native ads tend to draw higher click-through rates, while display ads generate more brand recognition.
Native ads can hurt the perceived trustworthiness of a news site.
Prominently labeling native ads boosts their effectiveness.
For brand marketers buying online advertising, deciding where and when to place ads isn’t the only consideration; there’s also the choice between display and native formats.
A new paper by Michigan Ross professors Anocha Aribarg and Eric Schwartz explores the effectiveness of these different types of ads — concluding that each has advantages and disadvantages that savvy marketers should be aware of.
Online display ads are similar to traditional print ads, with varied typography and often images presenting their messages in an attractive setting. Native ads, meanwhile, mimic the content surrounding them — such as a hyperlinked headline in the feed of a news site that leads to an advertiser’s website rather than a news story.
While the native ad format has become popular, little research has studied its effectiveness.
Aribarg and Schwartz conducted a series of experiments that compared readers’ reactions to display ads and in-feed native ads on news websites. By measuring click behavior, eye movements, and survey results, they found:
Native ads tend to generate higher click-through rates than display ads.
Display ads generate more visual attention and better brand recognition.
The presence of native ads on a news site can decrease readers’ perceived trustworthiness of the site.
When native ads are clearly labeled, advertisers can benefit from greater brand awareness without sacrificing much in terms of click-through rates.
If advertisers and publishers decide to use the native format, prominently labeling the ad’s sponsor seems to be the best choice overall — leading to greater brand awareness while strictly complying with FTC regulations.
“In practice, the choice between display and in-feed native advertising presents brand advertisers and online news publishers with conflicting objectives. While advertisers face a tradeoff between ad clicks and brand recognition, publishers need to strike a balance between ad clicks and the platform’s trustworthiness,” the researchers conclude.
Anocha Aribarg is an Associate Professor of Marketing at the University of Michigan Ross School of Business. Eric Schwartz is an Assistant Professor of Marketing at the University of Michigan Ross School of Business.
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