According to Adyoulike, brands will spend over $85 billion on native advertising globally by the year 2020. eMedia’s most recent study shows that US native advertising spend will hit over $41 billion by the end of 2019. In 2015, based on my own research, I found that for every five dollars spent on content only one dollar was spent on its distribution. According to Ben Young, CEO of Nudge, television executives do the complete opposite – for every one dollar spent on creative, five dollars is spent on its distribution.
The growth of native advertising budgets since 2015 is a clear indicator that the gap between content marketers’ distribution budgets and that of television executives is closing. This year, eMarketer is predicting US spend to hit nearly $33 billion. That represents a 31% growth YoY.
In comparison, television ad spending is predicted to be just under $70 billion this year. That represents 0.5% YoY decline. While YoY budget growth is certainly slowing for native advertising as a channel, it likely has many years of continued positive movement. More on the reasons why below.
Why are native advertising budgets growing so quickly?
There’s likely a dozen or more reasons, but the below three are the biggest macro reasons on the top of my mind.
1. Organic channels have dried up
With Google’s discovery of the Zero Moment of Truth (ZMOT), content marketing was thrust upon the business world early this decade. Some early innovators got their start early last decade. Marcus Sheridan calls these folks, “digital sooners.”
Last decade, the innovators were facing a state of content deficits on the Internet – meaning, there were more people on the web searching for solutions to their problems than there was content to solve them. During times of content deficits content marketers could rely on search engines and social media to drive the organic traffic they needed to hit KPIs.
Fast-forward to this decade – industries in a state of content surplus (with a few exceptions) can’t depend exclusively on the organic channels of old to drive top-funnel content visibility. This is because there’s more content on the web than people looking for that content to solve their problems.
This leaves paid media and PR as the only other two channels that promote visibility. This explains the rapid growth of both influencer marketing and native advertising in this context.
2. Top-funnel content is the priority
Google’s ZMOT concluded that most people research products and services online before they purchase. Last decade, when the majority of brands weren’t producing top-funnel content at any scale, consumers were filling the content needs of the online deficits – writing blog posts, testimonials and reviews.
Brands had two options – let consumers tell their story online or try and steer the conversation by telling their own brand-stories. Most brands chose the latter and content marketing was born. Over time, this created the content surpluses mentioned above and helped to dry up much of the organic visibility expected through search and social.
With top-funnel content being scaled across industries, native advertising was a natural fit for amplifying it. This dynamic has contributed to the growth of native advertising budgets this decade.
3. Interruption advertising isn’t working
More than 78% of consumers prefer getting to know a brand or learning about products through content as opposed to [interruptive] advertising. Native advertising, by definition, is not an interruptive format. As a result, the consumer preference dynamic mentioned above has contributed to the growth of native advertising budgets.
Below is an example of banner blindness. Statistically, a person is more likely to attend and finish Navy SEAL training than to click on a banner ad (according to Smart Insights – 0.05% CTR for display). In contrast, I’ve seen native advertising click-through rates over four percent. Clearly, interruptive advertising is not fit to deliver engagement with top-funnel content at scale. According to Forrester, half of all US online adults actively avoid [interruptive] ads on websites.
Native advertising budgets are continuing to grow as more and more brands realize that it’s the best online paid tactic to amplify content at scale. It alleviates the traditional reliance on organic channels for visibility, allows for further scale of top-funnel content production and distribution, and eliminates the problems associated with banner blindness and ad avoidance.