Native Video Ads Surge in Popularity in 2016
Marketing ROI

What Is the ROI of Native Video Ads in 2016?

5 Minute Read

To understand how brand marketing is shifting strongly in favor of native video ads, take a look at Facebook. According to SocialTimes, native advertising is by far the most popular ad format on the social network: eighty-three percent of all ads are native.

Since the start of 2015, native ads displayed through mobile apps using Facebook’s Audience Network have seen their spending increase ten-fold. Banner ads, once the hallmark of Facebook’s revenue generation, have been largely cast to the side in favor of more dynamic, engaging mediums.

There’s no question that video is more engaging for audiences than other forms of content, especially static ads. For many brands, the biggest obstacle is one of cost. Native videos are often much more expensive to produce even than pre-roll ads, because it’s original, high-quality and longer than a pre-roll spot. Those high costs require very strong ROI to justify that sort of expenditure. If the math doesn’t add up to clear-cut value and high returns, many businesses will opt for the more conservative approach.

For that cost-averse group, there’s good news: The more we learn about native video and its ROI potential, the better these investments look.

Facebook Video Ad Screenshot - Ben & Jerry's

Waiting to Be Discovered

Before we break down the numbers, it’s important to consider the shifting dynamics that have altered how brands engage with consumers. All you need to know is that today’s consumers hate being advertised to.

In the early days of the internet, banner ads were wildly successful: They were captivating and drew great engagement from users. But then banner blindness made it tougher for these ads to capture an audience. Meanwhile, increasing avenues for brand advertising, combined with tools to help consumers block ads from displaying in the first place, conspired to fill online audiences with serious anti-ad sentiments.

The logical solution: Stop trying so hard to reach out to those consumers. Instead, brands switched gears from outreach to discovery. They began creating content that could be found organically by interested parties. Company blogs, websites, downloadable white papers and case studies, social media: All of these enabled discovery possibilities, giving consumers the feeling that they were in the driver’s seat.

Increased personalization of ads and online content have also helped brands engage with audiences. When consumers believe they’re on the receiving end of personalized content, they are much more likely to engage with that content and the experiences it offers. Native video may be developed for large audiences, but the channels through which that video is delivered can use personalization strategies to customize the user experience.

Are consumers still absorbing advertising? Of course. But this shift in how ads find consumers, and vice versa, has completely changed how brands can best reach their audiences.

The Math Behind Native Ads

Based on the current research regarding native advertising, the potential value of successful campaigns is enormous—and well above what more traditional strategies can offer.

According to Adknowledge, the up-front costs of native video are very high. The typical cost-per-view is between 20 and 25 cents per person, which adds up quickly when you’re trying to reach a large audience. Pre-roll ads are much cheaper by comparison, with a cost-per-view between 10 and 12 cents.

So native ads generally cost twice as much as pre-roll. To maintain their value, they have to drive at least twice as much ROI. And they do: While pre-roll’s click-through rate tends to be between 0.5 and one percent, native ads can drive five to eight percent—gains five to ten times greater than pre-roll. Based on comScore data, here are their findings between the two:

Native Video vs.

According to a Nielsen study, brands benefit from native content to a degree that is almost hard to believe. Pre-roll ads typically generate 2.1 percent brand lift for advertisers. Native ads were a staggering 82 percent, per the study’s findings.

That incredible impact doesn’t have to generate too much consumer action and revenue before the strategy pays for itself. That’s why brands are more aggressive than ever when investing into native content.

The Value of Sponsorship

Facebook isn’t the only company witnessing the rise of native advertising. Business Insider has highlighted several online publishers that have seen native move from the fringe to the forefront of their digital revenues.

For example, LinkedIn’s native advertising has grown by more than 80 percent in the past year, while its banner ad solutions have seen revenues continue to decline. The Atlantic expects three-fourths of its ad revenue in 2016 to come from native options, and it has found that native content on its site enjoys user sessions averaging between four and five minutes. That’s four to five minutes of branded experiences shaping consumer interests and increasing their odds of taking action in the future.

Business Insider also points out the continued success of T Brand Studio, a branded content operation from The New York Times. The company has created 100 campaigns for more than 50 brands to date, and those campaigns now account for 20 percent of the company’s ad revenue. As brands deploy their own native strategies and see success, they’re making concerted efforts to repeat those impressive results and convert ad dollars into sales and revenue.

New regulations and social network policies are forcing brands to be more transparent about content that is native, but consumers don’t seem to care. The prevailing rule seems to be that if the content is good, the source—and their motives—are irrelevant. That should encourage brands to make solid investments into quality video content, knowing that effective strategies stand to cash in several times over.

Want to learn more about monetizing your marketing efforts? Download our eBook: The How and Why of Content ROI: Defining Goals and Measuring Success.

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Jonathan Crowl specializes in digital marketing and content creation for both B2B and B2C brands, with an emphasis on startups and technology. His past and current clients include B2B brands IBM, LinkedIn, Mad Mobile, Oktopost, BrightSpot, and Waze, as well as B2C brands Porsche, Epson, and PayPal. He lives in Minneapolis.

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