A Presentation By Peach, Inc. Will Shirey, Jane Skiles, Abbie Squier, Robert Svoboda

Native Advertising

Our Declaration

We here at Peach, Inc. intend to make it clear that native advertising is a form of communication with unparalleled power to build positive brand/

consumer relationships. Given this power, failing to utilize native advertising at our agency would be a grave mistake. However, native

advertising also holds the potential to destroy all consumer trust in brands and publishers if abused. It is vital that this tool not be used with

the intention of merely disguising brand advertisements as relevant content. !e great positive potential, and the great danger, of native

advertising is hinged on advertisers being consistently transparent, and only providing relevant, quality content. Native advertising allows brands

to provide value to the consumer in the form of entertainment or information in exchange for brand loyalty.

Ultimately, the focus of native advertising should be on the consumer.

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What is Native? Paid, branded messages that fit the look and feel of the media in which

they are placed. !e advertiser attempts to engage the consumer by providing content in the context of the user's experience.

The IAB recently split Native into six different formats1

In-Feed Units: Content is found within the normal feed of the platform; can be endemic, linked, or embedded in-feed units. (Ex: Facebook Sponsored Posts)

Paid Search Units: Text ads related to your search terms that are placed before the organic results. (Ex: Google’s AdWords)

Recommendation Widgets: Links to external pages with content related to current page’s content. (Ex: Outbrain’s “From Around the Web”)

Promoted Listings: Found on sites without traditional editorial content, but present products/services contextually targeted to current page’s offerings. (Ex: Etsy’s Sponsored Listings)

IAB Standard Ads With Native Elements: Placed outside of the page’s normal stream, but with a message relevant to the page’s content. (Ex: Banner ads with relevant context)

Custom: Any kind of native advertising not fitting into the previous five formats. (Ex: Spotify’s Sponsored Playlists)

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1IAB, December 4, 2013, http://www.iab.net/media/file/IAB-Native-Advertising-Playbook2.pdf

Examples of Six Formats In-Feed Units Paid Search Units Recommendation Widgets

Promoted Listings

IAB Standard Ads With Native Elements Custom

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IAB’s Native Evaluation Framework

In-Stream Out of Stream Form

Matches Function Doesn’t Match Function Function

Mirrors Page Content Behavior Introduces New Behaviors Integration

Narrowly Targeted Placement Broadly Targeted Placement

Buying & Targeting

Brand Engagement Direct Response Measurement

Clear and Prominent Ambiguous Disclosure

4 Along with IAB’s description of six formats of Native Advertising, they presented an evaluation framework of six course dimensions to determine if a native unit fits an advertisers’ objectives1. As a general rule, true and effective native advertising leans to the le$ of these continuums.

1IAB, December 4, 2013, http://www.iab.net/media/file/IAB-Native-Advertising-Playbook2.pdf

Why Does It Matter?

Increased Spending1 Offered By More Publishers2 •  Spending on sponsored content is projected at $1.9 billion

for 2013, a 22% increase from 2012. •  By 2017, spending predictions for sponsored content is $3.1

billion.

•  73% of publishers surveyed offer native advertising. •  17% were considering offering some type of native

advertising that year.

Effectiveness Increased CTR3 Increased Viewing4 Brand Affinity and Purchase Intent4

•  !e average CTR for display advertising is 0.19%.

•  A native advertising unit from GE resulted in a CTR of 8%.

•  Consumers look at native ads 25% more than traditional banner ads.

•  Consumers look at native ads 53% more frequently.

•  Native advertisements create a 9% higher li$ in brand affinity.

•  Native ads create a 18% higher li$ for purchase intent than for banner ads.

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1Ad Age, September 23, 2013, adage.com/article/media/publishers-sponsored-content-cash-fear-backlash/244276/?utm_source=daily_email&utm_medium=newsletter&utm_campaign=adage&ttl=1380515223 2eMarketer, July 22, 2013, www.emarketer.com/Article/How-Native-Ad-Campaigns-Shaping-Up/1010064#e0sI3dvvoK3zIUcm.99 3Beeby Clark + Meyler, 2013, www.beebyclarkmeyler.com/fetch_content.php?title=ge-native-advertising-case-study 4Sharethrough, May 3, 2013, www.sharethrough.com/2013/05/infographic-native-advertising-effectiveness-study-by-ipg-media-labs/

!e rapid growth of native advertising provides an even greater opportunity for brands to reach and

engage consumers.

Industry Trends

Our Pillars of Native Advertising

Consumer-Centric Approach

Transparency Quality Content Relevance Motive- Advertisers should focus on providing content that is not focused on purely promoting a product or brand but rather seeks to inform or entertain the consumer with real information. Journalistic Integrity- Publishers should ensure that the content meets the standards of their publication or medium. Journalistic integrity should still be upheld in this new landscape. Consistency-Consumer trust is hard to build but easy to destroy. Every post should provide quality content because all it takes is one bad post to erode trust in the brand.

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Consumer- Native advertising should build a relationship with the consumer. If the brand-created content doesn’t align with the consumer’s needs and desires, it will negatively affect the target’s opinion of the publisher and the brand due to increased clutter in the media channel. Medium- !e advertiser should understand the medium for which they are creating their content and how this medium relates to the consumer. Brand- Content created by the brand should be relevant to the brand’s overall messaging strategy, reflecting an area in which they have strong credibility.

Standard- If there is a standardized format or disclaimer for paid-for content in each published medium, consumers can easily discern native advertisements from the existing content. Content Accreditation- !e connection between the content and its creator should be evident. !e purpose is not to deceive the consumer but rather to foster a relationship based on that connection. Ethical Imperative- Brands should produce native advertising that is founded in clarity and full disclosure of sponsorship. !ere is a moral and ethical responsibility on the part of the medium and the advertiser to honestly interact with the consumer.

Examples: Relevance The Atlantic Forbes

As a business publication, Forbes has a very specific audience. !ey know who reads their publication and what they want to see. Forbes exhibited just this in their sponsored post “10 Leadership Lessons I Wish I Learned in My 20’s1.” !e article is sponsored by SAP, a so$ware corporation that makes so$ware to manage business operations. Because of this, the advertiser, publisher, and readership all align on an interest in the same type of content. In the end, the sponsored post was a success with over 65,000 views, 3,000 shares on Facebook, and 1,700 shares on Twitter.

!e Atlantic is a publication that has content varying from business to culture to health, and beyond. As a magazine that touches on every topic, one might assume that any sponsored content could find relevancy to the publication in one way or another. Yet this was not the case with a sponsored post early last year from the Church of Scientology, praising it’s leader David Miscavige. !e post received almost immediate backlash, and was removed later that day with an apology from the publication2. !e post was

not relevant to the publication’s voice, and in turn was not accepted by its readership. Overall, the Scientology post from the Atlantic was an obvious mistake for the publication, but also a lesson learned on how native advertising should be executed.

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1Forbes, April 8, 2013, http://www.forbes.com/sites/sap/2013/04/08/10-leadership-lessons-i-wish-i-learned-in-my-20s/ 2!e Atlantic, February 22, 2013, http://www.theatlantic.com/national/archive/2013/02/on-the-atlantics-scientology-ad-and-a$ermath/273447/

Examples: Content BuzzFeed

BuzzFeed prides itself on being a social news and entertainment website. !e site brings in over 85 million monthly unique visitors and brought in a rumored $60 million in 2013 through it’s sponsored content1. !e site knows how to create content that attracts attention and begs to be shared, but that doesn’t mean every Partnered post they create is a winner.

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Sony partnered up with BuzzFeed for a post entitled “10 Innovations !at Are Changing How We Do Music1. ” !e post features ten different innovations with pictures, descriptions, and sources, ending with a video of Sony’s latest innovation, the underwater mp3 player. Not only is this interesting content that is relevant to Sony and its image, but it gives Sony credibility as an innovator in the field of electronics.

Honey Nut Cheerios partnered up with BuzzFeed for a post entitled “12

Grandmas Killing It On !e Dancefloor2.” !e post contains 12 different GIFs of older women dancing, with unoriginal captions for each. It connects the post to the brand with an ending GIF of Honey Nut Cheerio’s mascot Buzz. However, without scrolling all the way down, you might not even realize that the post is sponsored, and if you do, it doesn’t bring credibility to Honey Nut Cheerios as a content producer or innovator, as the Sony post seems to do.

1BuzzFeed, January 23, 2014, http://www.buzzfeed.com/sonyelectronics/innovations-that-are-changing-how-we-do-music 2BuzzFeed, August 23, 2013, http://www.buzzfeed.com/honeynutcheerios/12-grandmas-killing-it-on-the-dancefloor

Examples: Transparency Cracked Twitter

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Twitter’s In-Feed promoted tweets are an excellent example of transparent and straightforward native advertising. Not to be confused with unofficial celebrity sponsored tweets with have no standardized disclosure, promoted tweets are clearly labeled as paid-for content with an orange arrow and advertiser name. !is standard allows for full disclosure to the consumer and an immediate connection to the brand.

In relation to Twitter’s promoted tweets symbol, online publisher Cracked’s native ad with Virgin Mobile, entitled “5 Brain Hacks !at Give You Mind-Blowing Powers1” seems

deceptive with no mention of a sponsor until the very last line of the two-page post. Publishers should clearly state that a post is a paid-for ad from the beginning. Without this element of transparency, brands and publishers alike take the risk of alienating consumer trust.

1Cracked, March 25, 2013, http://www.cracked.com/article_20166_5-brain-hacks-that-give-you-mind-blowing-powers.html

Where does it fit?

Where doesn’t it fit? Although it may not be clear who exactly native will work for, there are a few areas where native advertising arguably won’t work. •  Clients and categories with their target audiences not actively online

•  Although native advertising isn’t confined to online spaces, it’s where the majority of the practice is currently happening. Clients with less tech-savvy targets might have a harder time reaching them online, where they don’t spend as much as much of their time. Native advertising might not be best fit for brands with young children as an intended audience as well, because they don’t actively consume online content as much as the average adult does.

•  Ex: Mattel, Hasbro •  Clients and categories with touchy subjects

•  Some topics are naturally taboo within certain cultures, and because of this, should be handled cautiously. Religion and politics are topics that can risk offending and alienating audiences. Similarly, alcohol and cigarette brands have been risky subjects for advertising for decades, and require stronger regulation than most areas. Using native advertising to showcase these types of categories could seem unethical or even like propaganda. It would be best for these categories to implement native advertising cautiously, if at all.

•  Ex: Marlboro, Budweiser, Church of Scientology

10 Because Native advertising is only now becoming widely adopted and discussed, many ground rules and best practices

have yet to be determined. In some cases there are brands or categories where Native makes sense, such as mobile apps or retailers without terrestrial stores where the ad is placed directly in-stream and downloads are only a touch away. For other brands, it isn’t so clear.

We believe that the success of each brand is on a case by case basis, and ultimately, this success is only limited to the brand’s own creativity in cra$ing content that connects with their consumers.

Case Study: Red Bull Red Bull offers an extreme example of how bringing value to your consumer in realms adjacent to your brand message can work as a promotional strategy without ever having to hawk your product or brand specifically. !e Red Bull company started as simply an energy drink but has evolved into a trusted content creator in the realm of extreme sports. Everything that the company does contributes to the idea that Red Bull is a great lifestyle choice first, and an energy drink second. Despite what might seem like a lack of focus on their main product, Red Bull has managed to lead the exploding energy drink product category by a significant margin since it created it in the late 80’s1. By creating content that is inherently interesting, especially to their male 18-35 target1, the company doesn’t place ads, it places entertainment. What really makes Red Bull special, though, is the fact that it is leveraging its status as a widely trusted content provider to blur the

lines between brand and publisher. !e “beverage company” has it’s own publishing company, Red Bull Media House, which acts as the umbrella for the print, television, online and feature film productions that Red Bull does in-house. !is consolidation of roles represents a bright and exciting future for native advertising in which consumers go directly to their favorite brands for the content they seek rather than being subjected to advertisements disguised as branded content in their trusted publisher’s stream.

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1Mashable, December 19, 2012, http://mashable.com/2012/12/19/red-bull-content-marketing/ 1Forbes, December 7, 2012, http://www.forbes.com/sites/aliciajessop/2012/12/07/the-secret-behind-red-bulls-action-sports-success/

Case Study: Virgin Mobile

Virgin Mobile has been using native advertising tactics successfully since late 20121–one post has even received almost 715,000 social actions. Although their native ads have garnered success across the web, there is disconnect between the content of their native ads and the Virgin Mobile brand.

Rather than Virgin Mobile producing content related to technology or telecommunications, their posts generally contain lists of Internet-quips, GIFs, and pictures. Without the explicit Virgin Mobile logo at the top of their post, it is no different than any other trite BuzzFeed article. We feel that their content should tie back to their identity as a wireless communications company. Without the direct connection between content and brand identity, the message is lost and forgotten as online clutter.

1!e Native Ad Leaderboard, 2013, http://nativeadvertising.com/#/leaderboard/Virgin%20Mobile%2B%2B%2Bsocial_actions

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The Content Marketplace With an increased demand for content from marketers, supply will take time to catch up. !e chasm between supply and demand has become a breeding ground for entrepreneurship. !is newly formed real estate in the content marketplace has become a blank slate for innovators who have noticed the disparity in equilibrium. To fill this creative void start-ups like Contently, OutBrain, Sharethrough, and Triple Li$ have developed platforms for advertisers, publishers, and freelance journalists to connect and create relevant content. !ese revolutionary tools will take native advertising to the next level, providing economic benefit to both the coffee shop journalist and the corporate board room. !is provides a terrific opportunity for advertisers to engage outside sources for creative content and opportunities.

http://www.forbes.com/sites/je'ercovici/2014/01/15/contently-raises-9-million-to-build-the-plumbing-for-brand-publishing/ http://www.businessinsider.com/contently-pitch-deck-2014-1 http://techcrunch.com/2014/01/22/sharethrough-series-c/

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Contently is a startup founded 4 years ago that provides a platform for advertisers to find creative content written by freelance journalists. !e company just recently garnered media attention a$er receiving $9 million in venture capital funding. Following the FTC’s consent for native advertising, Contently has seen an explosion in transactions and increased funding due to the predicted expansion of native advertising efforts in the year to come. It would be wise for agencies, advertisers, publishers, and consumers to take note of this revolutionary tool, and look out for the companies that are taking part in this movement.

Current Issues Scalability •  Native ads have to be custom tailored to each medium they

occupy, making native advertising more tedious than one banner ad created for many different sites.

•  To work effectively, native advertising needs to be executed carefully by professionals. Creation of quality content cannot be outsourced to a computer or formula, which will most likely keep this form of advertising as a niche1.

•  !e placement of native advertising with careful targeting means that the advertiser has less say where exactly their ad shows up and when, assuming it shows up at all. Specifically tailored content may have less opportunity to be displayed elsewhere2.

•  Native units must be restrained, especially at this emergent stage. Publishers risk diminishing their own voice and losing consumers’ interest if they allow their current substance to be overgrown with sponsored content3.

1Mashable, September 25, 2013, http://mashable.com/2013/09/25/native-advertising-porn/ 2AdWeek, December 9, 2013, www.adweek.com/news/advertising-branding/6-companies-are-trying-solve-native-ad-scaling-issue-154374 3CPC Strategy Blog, December 17, 2013, http://www.cpcstrategy.com/blog/2013/12/native-advertising-experts/

Price

4Forbes, September 10, 2013, http://www.forbes.com/sites/benjaminboxer/2013/09/10/what-buzzfeeds-data-tells-about-the-pricing-of-native-advertisements/

•  !ere is no set universal pricing system for native advertising. Each publisher does it their own way.

•  Native advertising is a unique product that can currently be sold at a premium price, opposite of the current display ad4.

•  “As a scarce resource, native units are therefore naturally going to increase in price as more sell – the reverse effect from display3”

-Sebastian Hassigner Business Development Executive, !oughtleadr

(!at we shouldn’t forget!)  14

Long-Term Potential Issues New Frontier Economic Uncertainty

Consumer Conditioning Regulation and Standardization

Paid Flow of Information

Data Mining by Publishers •  It will take time for the category of native

advertising to develop and define itself. Some of the battle will be in determining what truly falls under the umbrella of Native Advertising.

•  Such a wide open arena. !e internet is the wild west. How do you reign in all the information, messaging, and individual freedom that comes as a side effect of the digital age?

•  Demand and Supply are not yet at equilibrium. Short term determination will set the bar for pricing long term. Pricing will fluctuate, but the standard will be set1.

•  Demand for native content could outstrip the supply of creative talent. As a result, most native experiences could be unremarkable editorial clutter.

•  With IAB’s Native Ad Playbook and FTC’s discussion of the practice, there will be continued standardization of native ads and native ad serving, especially in the areas of disclosure and transparency2.

•  Regulation will adapt and change as Native advertising develops.

•  Native could saturate the market with content that consumers then become conditioned to ignore.

•  A movement away from informative content to content with purely promotional purpose could emerge as time goes on and advertisers get lazy.

•  Emergence of “Native Product,” a combination of business, journalism, and advertising in the form of content that combines digital, video, web, and mobile1.

•  In an effort to more carefully describe and define the demographics of their audience, publishers could begin to introduce more methods of data collection. !is includes, but isn’t limited to, connecting profiles with Facebook and twitter, and providing opt-in information.

•  Data mining risks a loss of privacy for consumers, which is especially a problem when they’re not aware of the depth of information they’re giving out.

•  Currently there are 7 major media conglomerates through which a majority of all information is channeled. !ere is a potential for brands to become the producers of content for these media outlets. Instead of the brand supporting the media source as distantly as they do now, the information would be directly developed and channeled through paid sources. Ultimately, the consumer has the power in deciding whether the line should be drawn.

1Ad Week, December 22, 2013, http://www.adweek.com/news/advertising-branding/how-native-advertising-will-change-2014-154589 2IAB, December 4, 2013, http://www.iab.net/media/file/IAB-Native-Advertising-Playbook2.pdf

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Where We’re Going

Billboards already have the ability to evaluate the key demographics in traffic by tracking the radio stations being listened to by the vehicles passing by. By utilizing the increased ability to track people via their mobile devices and taking the wants and needs of drivers into consideration, billboards can become an even more viable means of reaching people with branded content. •  Advanced traffic reports to

common destinations of the people in traffic

•  Interactive social media displays •  Relevant breaking news headlines

We have only recently reached the point where brands can process data fast enough and cost efficiently enough to provide high levels of relevance and targeting to key customers. As this asset is further perfected and paired with

developing personal delivery technologies, a whole world of windshield moments will emerge.

Smart Billboards1: Google Glass2: !e Holy Grail of Native Advertising

Google Glass could allow brand interactions with consumers in their normal stream of consciousness at the most relevant times possible. For example Google Glass could target you by… •  Knowing you get coffee in the morning and promoting a special deal at a

coffee shop near your normal route •  Providing loyalty points for frequent visits to a store •  Retargeting ads that a consumer concentrates on by providing further video and branded content !e successful of this form of native would be dependent on brand’s ability to fulfill consumers’ wants or needs in a timely manner, while also promoting their brand.

1SFGate, December 22, 2002, http://www.sfgate.com/bayarea/article/High-tech-billboards-tune-in-to-drivers-tastes-2744204.php 2Contently, October 9t, 2013, http://contently.com/strategist/2013/10/09/how-google-glass-will-bring-native-ads-to-the-physical-world/#!tUZK8

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The End Beginning 17

Just like any other investment, native advertising has its risks. !ere is an element of uncertainty in how this form of communication will play out in the markets and in the ever-changing media landscape. !at being said, the reward from native advertising far outweighs the risk. In order to achieve a significant return on investment, the advertiser must assess ethical implications and follow a consumer-centric approach in producing their ads. !is new form of advertising leaves the door wide open for where the industry can go from here. While the future may be unlocked for advertisers, brands still shouldn’t walk through the door without knocking. In taking this leap, advertisers and publishers need to take responsibility for protecting brand value and preventing consumer confusion. By following the framework we have laid out, native advertising can achieve an ethical, beneficial, and organic communication strategy that can build a strong brand and an informed, loyal consumer.

It’s time for our agency to walk through the door.

The End Beginning