In his new book, Content Inc., Joe Pulizzi explores the ways in which entrepreneurs use content to build audiences and build their businesses. A pioneer of content marketing, Pulizzi provides insights into how businesses can harnass “the power of content in a world where marketers still hold fast to traditional models that no longer work.” Content Inc. explores a range of content types and tactics. Following is an excerpt from the book (edited for our format) in which Pulizzi discusses native advertising.

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An Opportunity with Native Advertising

Sharethrough defines native advertising as a form of paid media where the ad experience follows the natural form and function of the user experience in which it is placed. In simple terms, the advertisement looks like the content. This could be paid content that looks like an article on a media site, or it might be a post on LinkedIn that looks exactly like all the other updates from the people you follow.

There is probably no term that is getting greater play in the marketing space right now than native advertising. Even the largest media brands in the world, like the New York Times and Wall Street Journal, are trying to figure out how to generate revenues from sponsored content.

There could be a great opportunity for you to “dip your toe” into the sponsored content game, but it’s imperative to understand all the moving parts.

Native advertising is growing as a part of the larger advertising sector for a few reasons:

1. Media brands (including Content Inc. models) and social platforms (like LinkedIn and Facebook) are aggressively offering native advertising products.
2. Brands now spend approximately 25 to 30 percent of their budget on content marketing initiatives. Brands have started to make this a priority, so native advertising is seen as a viable opportunity.
3. When done right, it can work. For example, the majority of BuzzFeed’s revenues are through native advertising, and this strategy has been so successful that the company has been able to generate revenues at a substantial premium over traditional online advertising.
4. There is a renewed passion in the advertising community around native. This “new advertising” (even though it’s not new at all) has given hope to media buyers around the world that something can perform better than a banner ad.

What Are the Benefits of Native Advertising?
If you approach a company that has direct access to its entire audience through e-mail or another connection, it probably will have no need for native advertising (or any advertising for that matter). Most organizations are not in that position, which is why native advertising can be valuable (they are trying to steal audience, as we showed you in Chapter 16).

Other considerations:

• On the smaller mobile screen, the stream itself is the entire user experience. More and more, display advertising is not available. In the future, advertising options on mobile may only be native advertising. If a potential sponsor wants to reach your audience via mobile, native advertising is a possible revenue stream.
• Traditional banner ads generally do not perform well. According to Adweek, the average click-through for traditional banners is 0.12 percent. That means you are more likely to get hit by a bolt of lightning than click on a banner ad.
• Rent-to-own strategy. Native advertising can be a core strategy for sponsors to borrow your credibility and then transfer that good faith over to their own brand. At the same time, they are trying to make your audience their own. You need to be careful here as well.

The Best Way to Use Native Advertising
If you pursue native advertising as part of your Content Inc. strategy, consider the following:

• It cannot sell. The content needs to be educational, informative, helpful, or interesting. If it’s just about your sponsor’s products and services, it probably won’t cut the mustard. In addition, most media brands have quality teams to ensure that the content is good enough. They can also assist you in producing the content (for a fee). Remember, bad content on your site can destroy the credibility of your brand. That’s exactly why the New York Times has a division that only creates sponsored content for brands. The Times will not allow brands to create the content themselves for fear that they won’t get it right.
• Clear labels. As of this printing, the FTC is not going to get involved with any guidelines, in the hope that the industry will police itself. I believe that will happen—and is even happening now. Using terms like sponsored, promoted, or even advertorial is appropriate. Just make sure it’s clear to visitors that the content is a paid placement. Use your common sense.

Why Native Advertising Might Be Neither
Content Marketing Institute chief strategist Robert Rose believes that native advertising, in the purist sense of the term, is neither native nor advertising.

Rose on why it’s not native:

With few exceptions, my aim is to create content that stands out so well that you can’t help but notice the ironic, inherent pitch in there. I’m leveraging the fact that it’s in context with the brand to draw a certain reaction from the audience. So . . . the less “native” content is—and the more I can creatively leverage both brands in context with each other—the more powerful it can be.

Rose on why it’s not advertising:

The point is that if we are going to successfully utilize contextually placed content to achieve a marketing result, we have to think about it differently than we would an advertisement. . . . We, as marketers, must rethink what kinds of goals we want to achieve with contextually placed content. It is, quite simply, different than our goals with advertising.

Overall, some are concerned about the way that the lines between editorial and advertising are blurred with native advertising. In all likelihood, those concerns will continue to linger as native advertising continues to grow.

Regardless, as you grow out your content platform, native advertising is a possible tactic to diversify your revenues and support the platform.

Joe Pulizzi is founder of Content Marketing Institute, a leading education and training organization for content marketing, which includes the largest in-person content marketing event in the world, Content Marketing World.  Joe is the winner of the 2014 John Caldwell Lifetime Achievement Award from the Content Council.   Joe’s fourth book Content Inc. will be released September 2015.  His third book, Epic Content Marketing was named one of “Five Must Read Business Books of 2013” by Fortune Magazine. You can find Joe on Twitter @JoePulizzi. If you ever see Joe in person, he’ll be wearing orange.