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Native Advertising 101: How Does Native Advertising Work?

Apr 06, 2016 / by Ben Chacon



This month, as part of a five-part series, we’re teaching you everything you’ve ever wanted to know about native advertising.


Previously, we explored the concept of native advertising and explained exactly what it is. In today’s instalment, we’ll be answering another important question: how does it actually work?


You've seen native advertising before—that promoted article on CNN about "The best tools for an at-home manicure," or that 15-second pre-roll video about rock climbing you saw on YouTube.  You may be wondering how those native ads got there, or how you can create native ads to promote your branded content.


We've broken the process down into 7 easy-to-follow steps and created a fun and educational infographic as well. After reading this post, not only will you understand how native advertising works, but you'll also understand how to get started with your own native ad campaign. 


1. Create Content 

The first step that prospective native advertisers need to take is to create content. As we discussed in our last Native Advertising 101 instalment, native advertising works best when it involves the promotion of relevant contentcontent that adds value to your customers’ lives. This can be useful brand editorial or an entertainment video, but it’s using content as currency to attract and engage with your target audience.


It’s important to remember that native advertising is, fundamentally, a channel for brands to reach consumers with their value-adding content. It provides brands with an opportunity to have their content presented on the right websites, to the right audiences in the right format. 


2. Create an Account with a DSP

The next step is to create an account with a native advertising demand-side platform (DSP), which enables advertisers, agencies and agency trading desks to use real-time bidding (RTB) to buy and optimize online media.


Buyers can use DSP technology to centralize their native ad buyings (across all major sources of real-time bidded inventory) under one platform.


DSPs incorporate much of what ad networks previously offered, including access to a wide range of advertising inventory and targeting capabilities. But the advantage of using a DSP lies in their ability to buy, serve and track native ads using one central tool—which means flexible control over campaign performance. But we’ll get into that a little bit later.


3. Build Your Native Ad

Once you’ve created an account, you can start building your native adeither as a display native ad or a video native ad. 


With regards to display native ads, the first step is to think about what message you want to convey. Remember that not all images are created equal. A strong image on a native ad can capture user attention, inform them before they’ve even had the chance to read the headline, and even persuade them to click through to your content. On the contrary, the wrong image can confuse and even repel users. Try to ensure that the image is eye-catching and attractive to look at, but doesn’t overpower the ad's accompanying text.


Next is the headline. The backbone of a good ad is the same today as it was 50 years ago: it’s all about captivating headlines. When you’re crafting that all-important headline, try taking a little more time than you normally would. After all, a good headline has the power to make or break your campaign.


Finally, your body text. All of the most successful native ad examples have this in common: they loaded language—wording that attempts to influence an audience by using appeal to emotion or stereotypes.


4. Select Your Audience Segments

Now it's time to set up your targeting. 


Rather than saturating the net with your ads, a native advertising DSP will leverage data-driven targeting to reach consumers with your highly-relevant content. 


It's important to understand that the customer targeting abilities of native advertising is what makes it a great companion to branded content, particularly branded content that resonates with specific audiences at various stages of the sales cycle. Native advertising eliminates display waste. And when it's done right, it can help you serve ads only to users who are likely to perform a certain action.


There are a variety of targeting options you can use to target your ideal audience and achieve the results you're looking for. These include: 

  • Geo-targeting: Location targeting allows you to reach users in key geographic locations by country, state/province, or city (including DMA).
  • Contextual targeting: Contextual targeting allows you to choose the context of the page where ads will run, for example news-related pages or travel-related pages. 
  • Device targeting: Device targeting allows you to reach your users on specific devices including mobile devices, such as Android or IOS. 
  • Behaviour targeting: Behavioural targeting allows you to target specific users based on their previous online behaviour, such as browsing history or search history.  


5. Select Your Payment Method, Dates and Bid Price

Next, you can set up your campaign parameters. 


First, input your basic campaign information, such as name, advertiser, and start/end date, then set up your budget (how much you're willing to spend on each impression) and bidding strategy. The first thing to consider here is whether you want  to bid by cost-per-mille (CPM), cost-per-click (CPC), cost-per-action (CPA), click-through-rate (CTR), or cost-per-engagement (CPE). 


The bidding strategy you choose depends on your campaign's goal. Your maximum CPC defines the amount you're willing to pay per click, and your maximum CPM defines the most you're willing to pay per thousand impressions. With higher bids, your campaign will scale more effectively and will potentially give you access to better inventory. With lower bids, your campaign will likely gain less clicks and conversions, but have a lower CPC or CPM.


If you're unsure which option to go for, consider this: 


  • Generating Traffic: If you're looking to drive traffic to your website, a CPC bidding strategy may be most effective as it drives more clicks to your site. 
  • Increasing Brand Awareness: If you're looking to expose your brand to as many people as possible, try a CPM bidding strategy. It will focus on delivering as many impressions as possible, ensuring your brand's message gets in front of your audience.
  • Driving Direct Action: If your goal is to get users to answer a call-to-action and you're tracking conversions using our tracking tool, it's best to use a CPA bidding strategy so that the system focuses on conversions.
  • Driving Quality Traffic: If your goal is to to only pay for quality traffic, CPE is your best choice as it allows you to bid on users who have spent 15 seconds or more on your website (user engagement). 


6. Native Ad Is Served

Once you've completed the above steps you can officialy launch your native advertising campaign.


How it works is, through OpenRTB 2.3 protocol, the DSP will pass along your individual ad elements (image, body text, brand name, etc.) in the form of metadata to partner exchanges. The exchanges, in turn, work with publishers to assemble the metadata into a unit that is displayed as a native ad to a website or an app. 


Real time bidding (RTB) is the process of bidding for an ad placement in real-time by multiple advertisers. With your targeting, budget, bidding strategy and frequency capping set in place, the DSP will bid for ad placements that meet your parameters. During the RTB process, the page loads with no ad on it, and only with the “opportunity for an ad.” The page passes valuable information (known as the “bid request”) to multiple advertisers, and based on this information, advertisers decide whether or not they want to bid for this placement. The price is determined in accordance with the Second Price Auctionprinciple.


7. Native Ad Campaign Is Optimized

Once your native ad campaign goes live, your DSP will leverages machine learning algorithms to get the most out of every dollar spent. Analytics will track events after the initial impression and past the click, allowing you to optimize towards deeper user engagement. 


Optimizing for performance really means cutting out what isn't working and keeping what is. Following this idea, here are some of the things you can do to efficiently spend your budget and get a step closer to meeting your campaign goal:

  1. Cut Out Domains With Poor Performance: Look in your domain list and blacklist sites that aren't performing based on your metrics. For example, if you're looking to meet a CTR goal, cut the sites that aren't achieving that CTR. But be careful not to cut too many sites at once or cutting sites prematurely, as this can negatively affect the scale of your campaign. Allow a site time to deliver a sufficient number of impressions before deciding whether it's performing or not. 
  2. Cut Out Creatives With Poor Performance: Take a look at the creative reports and see if certain creatives are performing better than others. You can pause the ones that aren't performing as well.
  3. Adjust Your Bids: If your campaign isn't performing well, consider increasing your bid prices so that you can increase your chances of winning moreand potentially betterinventory. 

Check out the infographic below for a visualization of how these steps build on and compliment each other. 




Don't forget to check back for the next instalment of our Native Advertising 101 series!

Written by Ben Chacon

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