BuzzFeed dumps policy against banner ads in potential blow to native

Dive Brief:

Millennial-focused publisher BuzzFeed is dropping a long-standing policy of not showing banner ads on its homepage, articles and on its mobile app, according to Business Insider. A separate report from Business Insider suggested that the news indicates that BuzzFeed's focus on native advertising, where ads are tailored to mirror editorial content, has not panned out and that native might be difficult to scale overall.
BuzzFeed's banner ads will be served from Google's DoubleClick Ad Exchange and the Facebook Audience Network. The reason for the change is "both tactical and strategic," BuzzFeed CEO and founder Jonah Peretti told Business Insider. He noted that programmatic advertising has improved load times, ad quality and mobile experiences. The pivot might also help BuzzFeed better monetize its large audience and generate revenue in new markets before rolling out native ad campaigns.
BuzzFeed had more than 75 million unique visitors in June, according to comScore data cited by Business Insider. It's also reportedly prepping for a 2018 IPO, meaning that ratcheting up revenue options now makes sense.

Dive Insight:

Beyond markedly changing the user experience on BuzzFeed's website and mobile app, adding banner ads might come as a serious blow to media companies looking to native advertising as a savior for the online publishing space. From its inception, BuzzFeed has championed the power of native advertising through content including articles, quizzes, listicles and videos, and also shunned traditional display ads as an outmoded and not necessarily effective outreach strategy.

Native ads cater to a number of trends that both advertisers and publishers currently cherish. For publishers, they often replicate the craft and quality of non-branded editorial content, keeping readers engaged and away from ad blockers that sap revenue. For brands, they satisfy a demand for advertising that is narrative-driven and emotionally resonant with target consumers.

BuzzFeed pivoting away from native to focus on more traditional display units shows that the native format, while still providing value in some areas, can't be sustained on the scale it takes to run a major publishing business, per Business Insider. The news comes even as interest in native continues to ramp up and marketers are more often questioning the value of large-scale programmatic plays. The number of native ad buyers has increased 74% over the past year, while programmatic buys in Q1 of 2017 were down 12% compared to the year-ago period, according to recent findings from MediaRadar.

Signs of native's shortcoming have been apparent before, however. Earlier reports from MediaRadar said native ad renewal rates from 2016 hit only 33%, with one-fifth of advertisers using the format posting renewal rates below 20%.