NATIVE ADVERTISING - POWER, RESPONSIBILITY AND RISK Chelsea Smallwood Bachelor of Business (Marketing) Submitted in fulfilment of the requirements for the degree of Master of Business (Research) Submitted to the School of Advertising, Marketing and Public Relations QUT Business School Queensland University of Technology 2018 Keywords Native advertising, sponsored content, branded content, advertorials, marketing, advertising, power-responsibility equilibrium, ethics, responsibility. Native Advertising - Power, Responsibility and Risk i Abstract Proclaimed as the way forward in digital advertising, native advertising is rapidly growing in popularity with billions of dollars projected to be spent on this approach in 2018 (Niekerk, 2017). Popular for its ability to seamlessly integrate brand messages into content consumers are looking for on platforms they are visiting, native advertising offers brands a way to cut through advertising clutter and connect with consumers in an engaging way (Wojdynski & Evans, 2016). However, despite its popularity native advertising is attracting a lot of criticism for various reasons. Firstly, because it is difficult for consumers and regulators to identify that it is advertising content and therefore may be misleading and deceptive, and secondly, because it is difficult to regulate as there is no standard format. Coined in 2011 during an industry discussion of how to monetise publisher content online, native advertising is considered to be a new term within digital advertising and a new area within academic research. This study explores native advertising by first examining the literature from industry and academic discussion to understand how and why native advertising emerged as an advertising approach. Further, it investigates the perceived risks as well as ethical and regulatory challenges. From the literature review, an overarching research question was developed to guide this study, ‘What is native advertising and what are the ethical and regulatory considerations?’ Using the Delphi technique, this study examines native advertising from the perspective of the stakeholders (agencies, brands, publishers and academics) and how they view native advertising relative to similar advertising approaches such as advertorials, product placement, sponsored and branded content. Additionally, the stakeholders’ views about regulatory and ethical considerations and the risks associated with using native advertising are explored. Native Advertising - Power, Responsibility and Risk ii Chapter Four presents the results from the research questions. Chapter Five discusses these results and examines the key themes from this study, which include: priorities, power, responsibility, value and priorities. The key findings indicate that native advertising is viewed differently among the stakeholder groups depending on their priorities and motivations for using it. Publishers want to control the process from ideation to publication because of what it offers them in terms of advertising revenue and their readership through sought for quality content. Brands value the ability to cut through clutter and connect with consumers who are otherwise difficult to reach. Whereas, agencies value what native advertising offers as part of the broader picture in terms of value to the consumer and reaching a brand’s objectives. In terms of regulation, the stakeholders identified various risks associated with native advertising such as the potential for consumers to feel misled or deceived or that they may become sceptical of other publisher content. Native advertising is considered extremely difficult to regulate due its use online across domestic and international markets as it does not fit specific format types and is difficult to standardise with labelling. Content creators are aware of these difficulties and are faced with decisions around transparency and labelling. The stakeholders demonstrated a strong sense of responsibility not only because of the associated risks but also because ethically they believe consumers should be able to distinguish advertising content from editorial content. This study applies the Power-Responsibility Equilibrium (PRE) theory to understand the relationship between the stakeholders and the consumer. From the findings a model was created which furthers our understanding of power and responsibility in the context of native advertising, adding to it the inciting variable of risk. Various levels of risk were identified in this study and found to be a contributing factor towards rebalancing or disrupting the balance of power and responsibility. This research is important for several reasons. Firstly, it adds to the body of literature in the area of native advertising, and secondly it contributes to the understanding of the stakeholders’ perceptions of native advertising, their reasons for using it, their Native Advertising - Power, Responsibility and Risk iii ethical and regulatory considerations when adopting this strategy, and importantly their views on labelling and transparency. Further, this information offers valuable insight to regulators who are responsible for designing regulatory policy and who rely on stakeholders to exercise ethical responsibility. Native Advertising - Power, Responsibility and Risk iv Table of Contents Keywords ................................................................................................................................... i Abstract ..................................................................................................................................... ii Table of Contents ...................................................................................................................... v List of Figures ......................................................................................................................... vii List of Tables .......................................................................................................................... vii List of Abbreviations .............................................................................................................. vii Statement of Original Authorship .......................................................................................... viii Acknowledgements .................................................................................................................. ix Chapter 1: Introduction ...................................................................................... 1 1.1 BACKGROUND ............................................................................................................. 1 1.2 RESEARCH AIM and QUESTIONS .............................................................................. 3 1.3 JUSTIFICATION FOR RESEARCH ............................................................................. 3 1.4 METHODOLOGY .......................................................................................................... 6 1.5 THESIS OUTLINE ......................................................................................................... 7 Chapter 2: Literature Review ............................................................................. 9 2.1 INTRODUCTION ........................................................................................................... 9 2.2 ADVERTORIALS ......................................................................................................... 11 2.3 POWER-RESPONSIBILITY EQUILIBIRUM THEORY ........................................... 15 2.4 THE ADVERTISING ENVIRONMENT HAS CHANGED ........................................ 17 2.5 EMERGENCE OF NATIVE ADVERTISING ............................................................. 22 2.6 CRITICISMS AND NEW CHALLENGES WITH NATIVE ADVERTISING ........... 28 2.7 THE FUTURE OF NATIVE ADVERTISING ............................................................. 35 2.8 SUMMARY AND IMPLICATIONS ............................................................................ 36 Chapter 3: Research Design .............................................................................. 39 3.1 INTRODUCTION ......................................................................................................... 39 3.2 RESEARCH DESIGN ................................................................................................... 39 3.3 THE DELPHI TECHNIQUE ........................................................................................ 41 3.4 LIMITATIONS OF THE DELPHI METHOD ............................................................. 44 3.5 DELPHI STUDY PARTICIPANTS ............................................................................. 45 3.6 DATA COLLECTION, TIMELINE AND INSTRUMENTS USED ........................... 51 3.7 DATA QUALITY ......................................................................................................... 56 3.8 ETHICAL CONSIDERATIONS .................................................................................. 57 3.9 CONCLUSION ............................................................................................................. 58 Native Advertising - Power, Responsibility and Risk v Chapter 4: Results .............................................................................................. 59 INTRODUCTION .................................................................................................................. 59 4.1 RQ1: What are the elements that define native advertising