Remember when newspaper print ads were practically a cultural institution? Stroll to the end of the driveway on a Sunday morning for that several-pounder edition and pore through the articles and the ads. Scan the sales at Macy's, look for a new job, find a matinee time, decide which store has the best price on rib eyes -- the Sunday tome was practically the gateway to the world. Then the Internet relentlessly and almost instantaneously stole print advertising's relevance, leaving publishers searching for new ways to connect with readers and, just as important, generate revenue.
The New York Times Co. (NYSE:NYT) may have finally found that cup-of-coffee-worthy formula for advertising, infusing its smart editorial style into content that resonates with an advertiser's audience in a way that preserves its integrity as a news source.
It's been a long road back
It's safe to say that the heyday of traditional newspaper advertising is over, but looking back at what once worked it seems there are a few ingredients for success: The advertising must be compelling and relevant enough to get consumers to spend time with it. But it must also fit its platform -- that is, not compromise the spirit, tone and even journalistic mandate of its publication.
The Times recognized the need for innovation early, building one of the smartest and most clickable Internet portals for its flagship newspaper. Like many of its contemporaries, the company has replaced some lost ad revenue with digital advertising, but not nearly enough. It seemed something was missing. Across the Web, digital ad sales climbed dramatically in recent years, but stayed fairly flat at newspapers. Though moderately successful, banner and display ads and pieces from the ad exchanges never found a comfortable seat in the traditional news format. Ad perusers had plenty of other choices, after all, and consumers had left behind the notion of the newspaper as a place to shop.
Enter native advertising
The next "big thing" in digital advertising is shaping up to be sponsored content, with its gently rebranded moniker "native advertising." This approach to advertising has been around for a long time. From sponsored programming such as Mutual of Omaha's Wild Kingdom to advertorials, such as an article on proper make-up application by Maybelline, this style is all about gently branded but useful content which may or may not look to persuade the consumer. In the digital world, advertisers are using this style of advertising most often as a branding tool, a way to increase awareness and positive associations. While banner ads are measured by metrics such as click-throughs, the analysis for the effectiveness of a piece of native advertising is more about measuring the "bump" to the brand.
Native advertising has plenty of competition for attention on digital platforms, raising the quality content bar higher than ever. But for many outlets, it seems to be working. U.S. advertisers spent about $1.4 billion on native ads in 2012, a number that is expected to more than triple to $5 billion by 2017, according to marketing company BIA/Kelsey. The effectiveness of native ads is nowhere more apparent than with BuzzFeed, the fast-growing social media powerhouse that has built its revenue model entirely on sponsored content.
Of course, this trend has presented some problems for legacy media outlets such as the Times. The mandate to uphold the division between hard news and ads, sometimes labeled the wall between church and state, is taken seriously, both by the publishers and the public. How could the Times leverage the power of native ads without sacrificing the pillars of its own brand? BuzzFeed can serve up " 13 First Date Questions That Are Actually Insightful ," promoted by Bravo TV, for instance, but that type of content falls way outside the editorial fare of the Times.
What's more, BuzzFeed's model succeeds in large part because of the enormous viral potential of its sponsored content, delivering many more page views and visitors to the site than a static post. The Times, meanwhile, could not take sponsored content to its social media outlets, because of the news/advertising disconnect. Without that, the opportunity for a sponsored story to go viral was reduced to virtually nil.
The Times goes native
In early 2013, the New York Times Co. made its first foray into native advertising with a series by Dell. Clearly labeled as sponsored content with thick blue bars and a smaller font, the Dell ads demonstrated some success for the publisher and for the advertiser. Other native ad advertisers followed, including United and Goldman Sachs.
Reporting at the end of the second quarter this year, New York Times Co. CEO and President Mark Thompson noted a continued decline in advertising revenue, but identified an increase in native advertising revenue, dubbing it a bright spot. "We are particularly encouraged by the growing success of Paid Posts, our native advertising solution," he said.
Buoyed by early native ad success, the publisher launched T Brand Studio in mid-2014 to work with advertisers to "co-create" native advertising. This initiative has offered a number of advantages to the Times in its efforts to elevate its sponsored content. Working under the notion that "bad content is worse than bad ads," T Brand offers advertisers access to collaborative resources for high creative values, social media strategy, videography, and more. In this way, it intends to fuse the advertiser's brand energy with the creativity and standards of the newspaper company. For its inspiration, the publisher looks to the types of news content that has drawn the most readers.
What's more, T Brand branding allows the Times more flexibility. T Brand can go social with its content, launching its own Twitter feed in June, for instance. It can tell readers straight up that the content that follows has been created in collaboration with an advertiser and, it hopes, deliver on the promise that the piece will be very much worthy of its placement in The New York Times.
Sponsored content cracks the top 10
T Brand stepped out to early critical success, teaming with Netflix to produce Women Inmates, written by Melanie Deziel and published on June 13 in the New York Times. Clearly co-branded by T Brand and Netflix, the article is smartly written and infused with video and statistics. While meant to promote the second season of Orange is the New Black, the article aligns with Netflix's identity as a storyteller, provides an intriguing look at the life of women in prison, yet never mentions the series. Perhaps the strongest reminder of the series name is the distinct use of the colors orange and black in the graphics. In keeping with the sponsored content practices of the Times, the ad now lives at its own extension at a "paidpost.nytimes.com" url.
Speaking at The Native Advertising Summit in late July, Sebastian Tomich, advertising vice president for the New York Times, described the Inmates project as an attempt to create content that was "ambitious and immersive." By all counts, it succeeded, landing a spot for many days as one of the Chartbeat top 10 most-read articles on the site.
The article went on to "massively exceed [the Netflix] page view goal," according to Kristine Segrist, digital product development manager for MEC, the agency for Netflix on this project. "On many days," she added, "time spent with this article rivalled some of the time spent with the top articles on the New York Times." Segrist pointed to "time spent" as a much more compelling way of measuring reader engagement than just page views alone.
What's more, 50% of the page views came through social media. Not only does this show that the article was highly shared, it also demonstrates that it brought traffic to the site -- a true win for for Netflix and the Times. Tomich said he regards this as proof that "readers can still enjoy content when brand is front and center."
The New York Times has clearly found a formula for native advertising success through T Brand Studio. One key driver may be that the publisher has finally found a way to return readers to the level of engagement from those Sunday morning rituals of days gone by. The interactions might be different, but here is an approach to advertising that truly gets people to stay awhile.
Yet questions remain. Can this approach be monetized to a meaningful level for the Times and other publishers of its ilk? In addition, is it scalable? How many advertisers can be attracted to this level of production, and how many native ads can a publication support before losing its identity as a news source? Finally, will these ads produce enough measurable movement in brand identification and consumer behavior to make repeat customers out of advertisers?
With most of the paid sponsorship for Inmates falling in the third quarter of this year, the next NYT quarterly report could provide some intriguing indications of success. Beyond that, this is a trend to watch. This native advertising innovation appears to be viable, but we still need to see if it can significantly hoist the ad revenue bottom line.
Beth Nichols has no position in any stocks mentioned. The Motley Fool recommends Netflix and Twitter. The Motley Fool owns shares of Netflix and Twitter. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.