Native Advertising in Online News: Tradeoffs among Clicks, Brand Recognition and Website Trustworthiness

Abstract

Native advertising is a type of online advertising matching the form and function of the platform on which it appears. In managerial practice, the choice between display and in-feed native advertising presents brand advertisers and online news publishers with conflicting objectives. While advertisers face a tradeoff between ad clicks and brand recognition, publishers need to strike a balance between ad clicks and the platform’s trustworthiness. From a policy perspective, the U.S. Federal Trade Commission (FTC) has become more concerned about native advertising confusing consumers and hence has imposed guidelines requiring advertisers to clearly disclose their native ads. This research aims to understand how consumers respond to native ads versus display ads and to different styles of native ad disclosures. We employ a series of randomized online experiments and a field experiment combining clickstream behavioral data, eye movement data, and survey response data. The results show that when we control for the position of an ad on a news page, a native ad generates a higher click-through rate, as it better resembles surrounding editorial content. However, a display ad garners more visual attention and brand recognition than a native ad. Featuring native ads on news sites can also decrease the trustworthiness of the sites. Finally, with respect to native ad disclosure, the findings suggest that advertisers who prominently disclose native ads could benefit from greater brand awareness without sacrificing much in terms of click-through rates. Following the FTC guidelines closely may therefore be the optimal strategy for native advertising.

Keywords: native advertising, public policy, eye-tracking, field experiments, digital media, advertising disclosure, sponsored content