Native advertisements — ads that imitate the appearance of the surrounding content — have been a darling of the publishing industry for delivering high margins and explosive growth year after year.
But that growth is slowing, according to a new report from research firm eMarketer.
Spending on native advertising in the U.S. is projected to reach $32.9 billion in 2018, a 31% increase from last year, according to estimates from eMarketer. Marketers’ spending on native ads rose about 50% in 2017 and 64% in 2016.
EMarketer defines native display advertising as an ad that looks and performs like the content of the media platform on which it appears. Examples include sponsored content and ad units within social news feed but exclude banner advertising.
Most of the slowdown is because of flagging growth of native advertising spending on social media platforms. While companies like Facebook continue to post rising revenue, marketers aren’t able to continue to increase the allocation of their digital advertising budgets for social media as much as they had been, said Nicole Perrin, a senior analyst at eMarketer.
“It’s really just because we’re not predicting a significant increase in overall advertising and marketing budgets,” Ms. Perrin said. “There’s not enough money in overall budgets to see Facebook continue to grow the way it was.”
Despite those obstacles, there are several bright spots for native advertising overall, according to eMarketer. This year, more than three-quarters of all display advertising on mobile will be native, the report says. And nearly 96% of spending of advertising on social media will be native ad units, eMarketer projects.
Although Alphabet Inc.’s Google and Facebook continue to dominate the overall digital advertising market, rivals are beginning to chip away at their lead.
An emerging driver of native advertising growth is Amazon.com Inc., which thus far has been a relatively small player in the digital ad industry. The tech giant’s “sponsored products” advertising format, which allows marketers to target potential customers who are browsing its site, is luring a larger portion of ad spend, according to eMarketer. The “sponsored products” format is also an example of a non-social native ad.
In 2019, native ad spending will increase to $41.1 billion, at which point native ads will account for 61% of total digital display ad spending in the U.S., according to the forecast.
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