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Inside Forbes: It's Fight Night. PR Firms Take On Ad Agencies Over Native Advertising

This article is more than 10 years old.

As an entrepreneur, there are certain phone calls you never forget. Perhaps nothing beats the one that your funding hit the bank account. Another I vividly remember came in February 2010. "Richard Edelman here," the voice on the phone said. "Is Lew there?" I nearly fell off my $29 hard-plastic swivel chair, one of four I bought for each team member (a frugal act still viewed as cruel and unusual punishment). "I want to blog about Ad/Slant," Richard said. True/Slant, my startup, was a different kind of news network. Ad/Slant was part of our revenue model. Out of the blue, I had the CEO of one of the largest public relations companies in the world interested in us.

Back then, Ad/Slant was a concept and a nascent product. Richard was one of the first (Walt Mossberg was another) to spot what we were up to -- enabling journalists and marketers, each transparently identified and clearly labeled, to publish content side-by-side in a credible news environment. "The opportunity for us in PR," he wrote, "is to work in both the free and paid side of True/Slant." Over the last three years, that startup idea has morphed into FORBES BrandVoice, a leading product in the much-talked world of native advertising. A few weeks ago, Richard took me to breakfast to learn more about BrandVoice and to outline Edelman's plans to implement his vision with publishers like FORBES and others.

Native advertising is in its infancy, facing both opportunity and risk. For starters, the term "native" ads is frequently defined using a mashup of industry jargon. That often results in the clash of spin and substance. Then there's the question of how to label brand content on digital screens or print pages. Right now, it's all over the map, potentially leading to consumer confusion. Journalists, who've maintained an uneasy peace with the print "advertorial," find the integration of native ads on digital screens even more troubling.

What's crystal clear is this: the advertising and PR industries are ready to rumble. Since the 1950s, the goal of PR professionals has been to build relationships with journalists -- to get stories about their clients published. That's now referred to as "earned" media. In contrast, ad agencies came into being to develop and produce marketing messages -- print ads, then 30-second spots, then digital banners. That's called "paid" media. With native advertising, the PR industry smells the opportunity to help brands create a different kind of earned media that is new kind of paid media. Or as Edelman puts it in this special report, "turning content that's created or curated by corporations into a new form of advertising." That means PR companies going after what they covet most -- the huge brand-marketing budgets controlled by ad agencies that make corporate communications budgets look like rounding errors.

Naturally, Richard believes PR can play the better game. Native advertising, when done right, is more about storytelling than pitching a product. And PR prides itself on understanding the news agenda, not finding the sales hook. "Our assessment is that the public relations firms will make a different contribution to the paid space than the media buyers (ad agencies)," he wrote last week. "The PR firms will use paid to accelerate or amplify earned or owned content, while the media buyer will have the paid content that is recommended and executed by the media company stand on its own."

Native advertising isn't a sure win for PR companies, even for those that have successfully built social media departments to serve their clients.  Culturally steeped in "earned" media, they need a "paid media" blood transfusion. A top PR executive from Weber Shandwick laid out the challenge in The Holmes Report, a trade publication: "If you backup what is relevant, engaging content with paid promotion/syndication, it can be five times more effective. It’s a bit of a dirty truth for us PR folk, because we like to believe that earning media is what it’s all about.” As daunting, PR firms need to bring in media buying expertise. Creating content for brands is one thing. Acquiring ad inventory and building a media plan for that content is quite another. Edelman, one of the largest independent PR companies, must still compete against advertising behemoths that also own PR units -- and for that matter the CMO and his money. John McCarus, SVP/Content at Digitas, says the agencies still have all the resources. He believes  it's a matter of allocating them differently -- and aligning incentives -- to get more "aggressive" about earned media. Digitas started down the path two years ago, with the launch of BrandLIVE, a newsroom for clients (Edelman has its plan for what it calls a "creative newsroom).

FORBES launched BrandVoice well before native ads became the new thing (historical note: "PR companies will want to know about this," Tim Forbes advised me in mid-2009). All along, we've stressed the need for transparency (the consumer must know who's speaking, journalist or marketer) and the belief that content is content, meaning both editorial and brand content should rise or fall on its merits. Edelman has put together what it calls an "ethical framework" for brand content ("disclosure, quality and process") that speaks to both those concepts. Richard also told me about Edelman's plans to build a "creative newsroom" to work with his clients.

The $10 billion digital display advertising business is clearly in for disruption. Banners and rectangles, more than a trillion are served up quarterly, are increasingly wallpaper to consumers (clickthrough rates hover at a negligible 0.05%). They can also be sold and bought through computers much more efficiently than through human sales staffs. Those two facts combine to put relentless downward pressure on CPMs, the price marketers are willing to pay for 1,000 ad impressions. Falling ad rates have hit journalism where it hurts. The American Society of News Editors says that nearly 20,000 newsroom professionals have lost their jobs since 2000 (part of that is recession related).

The story. The press release. The commercial. They are inextricable pieces of the news business. The fear is that digital publishing puts them on the ultimate collision course -- one that can damage journalism and confuse consumers. With total transparency and clear labeling, each can still serve audiences in unique and important ways -- and journalism may just find the revenue stream it desperately needs to continue to serve the public interest.