Native advertising as an industry has grown from $1.6 billion in 2012 to an estimated $4.6 billion by 2017, according to BIA Kelsey.
But for most local media today this is a new skill set, and pricing and packaging models abound. A brief survey of programs revealed starting prices ranges from $299 a month to $7,000 a month. This report looks at how various programs establish pricing values including:
1. Native advertising pricing concepts
2. Examples of pricing models
This includes a round-up of pricing at local native program including the one at Quad City Times, The Dallas Morning News, and BrandView, the native program at Deseret Digital.
3. Conclusion and lessons learned
In general, from our survey and conference speakers, we found that many local media charge that have little back-up - if advertisers are willing to pay the rate, they know it "works."
In addition to CPM-based value from promotional traffic to the article, there is also value in the creation of the content, placement with the news on the most prestigious news page, additional interactiion of readers with the content that is unlike traditional display adds.
Local media with native ad programs all sell the additional values, however, they very on premiums charged and ability to measure "results."
1. Native advertising pricing concepts
As a branding medium, native has a different value to advertisers than direct response advertising.
The value equation stems both the qualitative factor of placing advertiser editorial content in the news stream next to - and competing with - traditional news, and quantitative factors such as how much traffic is driven to that content via all distribution mechanisms.
The value of a particular native ad, is also determined by "how effective" the content is as determined by clicks to the article, social shares and time on page.
Here's a list of all the values created during native ad programs, shared by Todd Handy, Vice President of Advertising Strategy at Deseret Digital Media, at the Native Advertising Summit:
• Content creation
• Home page impressions (headlines, paragraph that links to the story)
• Article impressions (click throughs to the story)
• Article actions (shares and comments on the story)
• Engagement time, scroll depth and story completion
• Social impressions (side door traffic from social posts to the story)
• Social actions (likes, comments and shares of the story)
Handy also shared the below value pyramid to show how the value metrix differs from direct response:
To determine pricing, it helps to begin with the end in mind: That is, not only how will the program sell the value of native ads, but also how they will prove results. Here are a few recommended steps:
a. Start by building a model that separates unit values for creation, distribution (on the media-owned site) and extra promotion (on social media, ad networks, and extra site areas).
• Content creation has some value in and of itself, so while the advertiser may never "see" this charge, it should be included in the cost structure on cost-plus basis. Many local companies sell native ads with a charge "per article" that includes a base level of distribution on the home page and a minimum number of articles.
• Value the distribution on the media-owned site typically means calculating the home page traffic and what share or number of impressions the client will receive on that page. High traffic sites typically promote articles two to three times a day, smaller sites may promote the article for several days until the required level of promotional impressions is reached.
• Estimate traffic to the article page. The average views or CTR of a standard editorial article in the same position on the home page for the same amount of time is a good place to start, since the native articles should be equal to or better at engaging audiences than editorial.
On KSL.com, for example, this means an average 2% CTR against impressions served generate an average of 13,000 article views, which the customer typically counts as "reads." Some of the local native programs have as little as 600 article reads, but that will be a factor in how the pricing holds up long term.
• List all promotions can be added to pricing tiers. These include social posts on a managed client site as well as on the media site, Twitter, email blasts, upsells to additional areas of the site and to ad networks.
b. Create bundles or sponsorships in tiers.
According to BIA Kelsey, there are basically three models for pricing native content: Nationally, 41% of current programs sell sponsorships, 41% sell bundles and the rest use a CPM model. On a local level, all the native programs we looked at sell bundles that include "sponsored posts" and use the term "sponsorship."
"Integrated baskets are better because it's harder to pick you apart," said Rick Ducey, Managing Director of BIA Kelsey, summing up the conclusion of local native managers at the Native Advertising Summit.
The sponsorship bundles tended to use a "price per article" that includes a layer of distribution and promotions.
Then further tiers add extra social promotions such as Facebook, Twitter, emails, plus sponsored posts, other site areas or ad network buys.
Some tiers also included additional articles - ie package of 4 or 12.
And a few media also upsold the native content into the traditional media For newspapers this means adding a print article which, though marked as "sponsored," uses the same font and design as the newspaper (see Quad City Times, below).
For TV sites, the upsell may be an interview on a local show, such as community health, a version of native advertising that has been around for years.
Finally, some campaigns are tiered to the number of native articles. While a few native programs have minimums of a certain number of "months," others use a minimum number of articles, which can can run as needed, whether all at once, or over time.
c. Test pricing against real CPM for all impressions
To test the pricing model, first check the overall CPM - some clients will still back this out, according to Handy. Impressions include home page views, clicks to the article, impressions for any and all ad units on the page (typically three), social views, shares, eblasts etc.
While the CPM for article "reads" is typically $200 to $1000 per thousand, the overall CPM on large sites like KSL.com, counting three units on the article page, runs aroudn $4 to $5; similar to pricing on the national level.
"Your (larger) advertisers are absolutely wondering about display impressions and backing out the CPM. Even though it is a thought leadership medium, analytics are very important," Handy said.
Smaller newspapers achieved a CPM's for native ads many times higher, and relied more on a qualitative sale.
d. Test the pricing against other factors and for parity versus other advertising offerings
This is where even small market native programs shine. Click through rates on native are so much higher and reader engagment ("time spent with your brand") so much longer than, say, a banner ad, that another way to look at the "results" is number of article reads for the price.
Of all factors advertisers look at first in native ads results, article page views is fundamental.
Most advertisers assume a click means their article was read. So estimated article reads (ie similar to a home page news article appearing for the same duration), and test the whole dollar price versus "aticle reads." How will the the advertiser perceive this value?
In particular, advertisers like to see articles on the home page getting as many "views" ie; clicks from the home page, as other editorial. Social shares that show "how good" the article was, but establishing that reader preference for the content.
We found small and large native programs had success comparing results in number of reads and total time spent, with results from using traditional branding media, whether in numbers of reads or total time spent reading.
e. Check pricing against market demand.
What pricing the market will bear is also a factor. Branding customers often have whole dollar sensitivities, since the ROI is not "paying for" the ad program. Since native is used for branding, it competes with TV dollars so it is helpful to run pricing metrics against the cost of a network buy.
2. Specific pricing models - National and local
From local media conferences, we've picked up pricing levels at a variety of national native programs. Basically these primarily show that an underpinning of CPM is in play and that native ads are garnering big dollars for a variety of web-based media and traditional media websites:
• Buzzfeed- $100,000 for 4 to 5 listicles. They will take campaigns as low as $5,000 per post with a minimum spend of $50,000.
• Business Insider - $5,000 for a sponsored post, $15,000 for a sponsored video
• Forbes - $50,000 to $75,000 per month, minimum of three months.
• HuffPost - $40,000 per post, including 4 days of site promotion equaling 20 million impressions.
That means the HuffPost is selling at about $5 per 1,000 impressions, but beyond that, it's difficult to use these metrics to establish local pricing.
Local media pricing models are all over the board. At the high end of the spectrum, Houston Chronicle sells package averaging $7,000 per month with a three month minimum. Customers are expected to move to $12,000 within a year. Annual programs can run up to $250,000 including distribution on Outbrain.
Also at the high end of the spectrum is the Washington Post, which sells BrandConnect campaigns for $50,000. The prestige of the Post and the value of placement next to high value editorial is part of the value proposition, says Ethan Selzer, who heads up the program.
Here are some other specific local program packaging models:
• The Quad City Times
The Quad City Times' native program's pricing starts at $1,500 each for a minimum of four articles, which can run together or in four months. The price drops like a print ad with additional frequency. There is also an upsell to a print quarter page, that use the same font as the newspaper, unlike advertorials which are required to be different, and for special kinds of content such as video or slides, and for extra promotion:
The home page of of the Quad City Times gets about 30,000 views, said Katie Wilson, former head of the program there, speaking at the Native Ad Summit. Running in segments over three days, an article such as a recent one on the YMCA may get around 23,000 impressions.
If the CTR is 2%, for example, the advertiser receives about 460 reads, plus the extra posting. But that is not how the campaigns are sold to the advertiser.
"We position them as an expert in their field, on the home page of our site and riding along with the email blast. The visibility itself is more than just advertising; that's what they are buying." says Katie Wilson, until recently the Quad City Times' Digital Advertising Director.
• Speakeasy at the Dallas Morning News
SpeakEasy, the content marketing agency of the Dallas Morning News, prices bundles at an average of $3,750 a month with a three month minimum and a minimum buy of $3,000.
The starter buy includes setting up a blog on the client site, two posts a week, and promotions on a couple of social channels.
Native ads - promoting the content on the Dallas Morning News' Events Guide are one of the promotional upsells if the customer wants to pay to take advantage of the massive home page traffic. Of 70 clients buying content creation, social promotion and native advertising, 11 spend an average of $15,000 a month.
• BrandView at Deseret Digital
A program created by Deseret Digital, BrandView, runs native ads on its mega-site KSL.com. Typically the team "shoots for" a $2,500 price per BrandView article with a three month commitment. The article runs through the story queue several times a day on the home page, which has almost 600,000 page views.
The average article page has a total of 13,000 page views.
Taken alone, that would be about $200 CPM for the article views - still far lower than Quad City's rate.
However calculating all the impressions on the home page, plus 100% SOV for the display ads in the article (728x90, 300x600 and 300x250), social shares, comments, etc. the actual CPM falls to around $4.
Chris Lee, president of Deseret Digital also compares the pricing model to other media options, by focusing on results.
"We asked how much display media would a client need to by to get 13,000 engagements with brand in the form of a click-through?" said president Chris Lee, president of Deseret Digital, speaking at the Local Innovation Conference.
With a .1% CTR - which is ahead of the national average - it would take 13,000,000 impressions, which, at $3 CPM is $39,000.
So, at $2,500 an article, the advertiser's branding value exceed expectations.
• Naperville Sun
The Naperville Sun is one of the community weeklies that are part of the Chicago Sun Times Group, and has been experimenting with selling native to smaller local advertisers.
They priced their native ads at the low end of the spectrum, and are now reformatting their pricing to include more impressions and a greater focus on branding.
The original bundle included one to 2 native articles a month, published as a blog on the directory site, then pushed to one of the suburban websites. The bundle included banner ads on the community site and mobile geo-fencing. Packages ranged from $299 to $999, with a typical native campaign running $600 a month for six months.
While sales people like the package - selling several hundred in 2014, the first year, advertiser expectations were still focused on ROI and the drop off was high.
They are working on a reformatted program to be merged with the Sun Times' native program, and deliver a larger number of impressions to the native ad.
Tiers will be created based on better positioning (they refer to as "slotting) on the home page of the Sun Times.
"Above the fold gets the most views and will be higher-priced," said Jamie Cohen, VP of Digital Business Development at the Naperville Sun.
"We are moving away from a bundled, SOV model towards a CPM model." .
Cohen also compares the value of the native ads to other options, such as PPC advertising:
"If you have 400 reads, and someone spends a minute and a half with your brand, in the PPC arena that would cost $10 a click to achieve," Cohen said. "It's way better than a banner ad."
3. Summary and conclusions
From this overview of local native programs, we derived the follow observations and lessons:
• The basic tiers of value: Creation, distribution and promotion seem to emerge as a fundamental way to package and tier.
• Most markets are selling in tiers based first on a set number of articles and base level distribution
• All programs sell native as a qualitative opportunity for advertisers to run home page editorial.
• Markets with very large clients are prepared to back out CPM, including all impressions. Running three ads on the article page is a way to increase branding for the client, cicks o the client site and impressions for the overall CPM. Large markets are achieving an overall CPM of $4 to $5; smaller markets run at several times that number.
• The hosting location of the ads- whether on the client site or the media site is a less understood determinant of value. The Washington Post and Deseret Digital host content on their sites in a holding area on the media site. SpeakEasy hosts native on the client site, which has the value of being counted as a click to website.
• There is demand for native at the lower end of the market (under $1,000 an article). However smaller merchants have proven to be more ROI-oriented. While this may be overcome by a change in selling tactics, successful programs started at $1000 per article/package and up tended to have more satisfied customers.
• Bundling native with traditional display campaigns may confuse the objectives of branding versus direct response, and should probably be avoided, with the exception of display ads on the native ad pages.
• A variety of equations for "proof of value" are emerging. These include comparable costs of achieving the same end result via PPC campaigns, display campaign and television. Time spent on the article page and shares are particularly compelling indications of reader engagement.
• To prove value, market survey programs such as Civic Science (which is free) can test brand lift within the media's audiences.