Buzzfeed just sent out a message to the digital publishing business

  • Jonah Peretti Buzzfeed 8127Business Insider

    BuzzFeed has decided to run banner ads  the ubiquitous, clickable square and rectangle ads that appear all over the internet  after years of talking them down.

  • The decision shows the limitations of native ads, customized ads designed to emulate the look and feel of the websites or apps they appear on.
  • A number of digital media companies bet big on these native ads, but time has shown that they are difficult to produce at scale. 
  • As an IPO approaches, Buzzfeed will now turn on the taps to "programmatic ad" revenue. 

Never say never in digital media.

For years, BuzzFeed executives preached two things. The digital ad industry needed something better than the much maligned banner ad. And web ads should be "native."

So-called "native" ads should look and feel like the websites they appear on (think a Promoted Tweet). They should be custom to that site and that advertiser. Ideally, in BuzzFeed's view, web ads should be actual "content" that people enjoy and might even want to share, like "9 Simple Things You Can Do For the Crazy School Week Ahead" which looks much like any other post on BuzzFeed, only it's brought to you by Target.

But there was always the question about whether such hand-crafted ads could scale enough to build an entire media business around, particularly one that is set to get public at a valuation in the billions. 

That explains BuzzFeed reversing course, and fully embracing programmatic advertising, including highly targeted, data-driven ads and classic banners, as Business Insider reported. Those are the same kind of ads former BuzzFeed president and Cheddar founder Jon Steinberg once called a "completely broken product" a few years back. Founder Jonah Peretti even once mused about whether the fictional character from Mad Men would really love banners.

To be fair, companies change their minds. Remember when Google was adamant that YouTube would never run pre-roll video ads? And it wasn't just BuzzFeed that espoused this view. A new crop of digital publications ranging from Refinery29 to Mic over the past five years or so spoke about the need to rethink digital advertising entirely. They proudly touted themselves as anti-programmatic.

More recently, executives across digital advertising have talked about the web as a vast wasteland, cluttered with too many lousy ads or ads chasing people around to buy those shoes they put in shopping cart on Zappos.com and never bought. People were sick of their web searches getting hijacked, or mobile ads sucking up their data plans.

Many consumers started installing ad blocking software. So various industry initiatives were born with pledges to clean up the web and getting rid of bad ad clutter. This was all the fault of the banner ads and programmatic ad tech ecosystem. Native ads were supposed to be a better mousetrap.

True, content produced on behalf of a paying advertiser was nothing new. Magazines had run advertorials, or "special advertising sections" for decades. But this was different in the fact that many aspired to have sponsored or "native content" become not just a side business, but the core advertising product for digital media. 

But at some point, such idealism gives way to discussions about measures like ARPU (average revenue per user), especially when you have venture capital investors. Even as every major publisher builds out large content studios, there is surely a limit to how many articles like the Samsung-sponsored "11 Simple DIYs That'll Help You Reorganize Your Laundry Room" anybody can crank out in a given week.

Dave Nemetz, cofounder of Bleacher Report and now CEO of the science content site Inverse.com, said the BuzzFeed news was "shocking" but also logical. 

"There is still a ton of growth in branded content, but it is so, so crowded," he said. Plus, "the margins are lower and the execution is so much more involved. Brands and publishers can only do so much. Not everyone can do sponsored listicles and build a business." 

That's why so many publishers are experimenting with alternative revenue streams, like commerce, said Nemetz.

If you have an audience as big as BuzzFeed's (75 million plus, per comScore), turning on banners, particularly those sold coupled with data promising advertisers precision targeting, is instant revenue. eMarketer predicts that programmatic ad spending in the US will eclipse $32 billion this year. That's hard to turn down, even if you may not love the way display ads look on your pretty website or app.

emarketer Programmatic advertising continues to grow eMarketer

The banner is hard to kill. Even as people mock the inertia in the TV advertising business, it exists in digital as well. Digiday's editor in chief Brian Morrissey often refers to the "banner industrial complex." 

"Everyone talks about disruption, but this is a very slow to move industry," said Nemetz.

For BuzzFeed, if done well, the move makes sense. The company's position is not unlike that of Snapchat's at the moment. You can only get by for so long only taking phone calls from top brands with a few hundred thousand to a few million bucks to spend on specialized campaigns. Programmatic ads should help BuzzFeed cater to advertisers of all sizes, particularly those looking to zero in on specific audiences, like people in the market for a new car.

Unlike Snapchat, BuzzFeed starts with a $350 million business centered on sponsored content, as Bloomberg reported. It can continue to build on that while making easy money from banner ads, especially in markets where it doesn't yet have a big sales team on the ground. In the process, it can take a slice of the growing programmatic advertising pie.

Still, the capitulation to the banner appears seems to serve as a harsh reality check for digital publishing. Maybe someday native ads will become the dominant ad vehicle in digital media. But for now the banner is alive and well.

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