Native vs display advertising - which has better ROI?

Apr 05, 2024

There are constantly changing trends in emerging channels and types of advertising a business can explore to gain visibility for its brand. Looking for the most cost-effective channel and form of advertising is critical for business success.

Native vs display advertising has been a topic of discussion for many across industries. And the answer to cost-effective marketing isn’t one or the other but rather doing both in the correct context.

What is native advertising?

1. Meaning & format of native ads

Native advertising refers to media that is created based on a particular platform’s requirement and advertised on it. The format of native ads depends on the platform that you are using to advertise.

For example, you can have banner ads or video ads on YouTube, while on a platform like Instagram you can have image and video ads based on the viewing structure such as a normal square image post or a vertical image for stories.

2. What businesses dominantly do native ads

Apart from the businesses that are not allowed to digitally advertise, technically any other business can do native ads. But you will mostly see businesses that can reach their potential customers on a particular platform natively advertise on a channel.

Be it a product or service, if you can target and reach a part of the population that fits your ideal customer persona, then running native ads on a channel is suitable for your business.

3. How they are different from other display ads?

Native ads are shown to users of a particular channel or platform when they are browsing that site, hence the name native ads.

These are different from display ads in the sense that they will not be shown to a user on other sites that they visit.

4. Native advertising channels

Any channel of distribution that allows people to advertise in the format of the content that it has organically can be considered as a native advertising channel.

Some of the most commonly used native advertising channels across the world include Facebook, YouTube, Instagram, LinkedIn, TikTok, Twitter, and many other social media channels.

What are the benefits of native advertising?

1. Targeted traffic

Most native advertising channels are those that have a huge user base spanning from millions to billions. With so many people present on a platform, advertising on it becomes a great way for your business to reach people and get targeted traffic.

This in turn will later help you retarget people who are interested in your business.

2. Increase in purchase intent

Running ads natively is a great way to increase the purchase intent for your product or services.

Building organic channels takes time and so advertising is a great way to experiment and see the response you get from an audience and retarget the engaged people for sales and conversions.

3. Higher visual engagement

Native ads follow the media format which is followed by the organic content being put out on the platform. So as an advertiser, you will be able to create and experiment with many types of creatives from images and videos.

What is display advertising?

1. Meaning & format of display ads

Display ads also known as banner ads are usually text, static images, or interactive banner ads that you see while searching or browsing different websites.

They generally don’t follow the media format of the platform that you are on but are rather displayed very distinctly. They can easily be identified as ads on a site.

2. What businesses dominantly do display ads

Businesses who want to reach more people and increase their visibility generally opt to run display ads.

Display ads are great to increase recall value and constantly get in front of potential customers to improve awareness and always keep your brand top of the mind of people.

What are the benefits of display advertising?

1. Brand awareness

Awareness is the first stage of any buyer’s journey. Unless and until a person is aware and knows about your products and services, they will not make a buying decision.

Display ads help build this awareness by constantly showing up in front of potential customers on the web.

2. Potential for remarketing opportunities

A great thing about display ads is that they can be targeted to an audience based on their previous activity; meaning they can be used as a form of retargeting ads.

For example, if someone has visited a particular page on your website, you can retarget them to show display ads or if someone has clicked on your native ad and visited your e-commerce store, then you can retarget them with display ads as well.

3. Helps in boosting intent purchase

It is a well-known fact that the way an individual makes a buying decision has evolved over years and advertising must also keep up with these behaviours. Most people don’t make impulse purchases nowadays

The more you show up in front of them, the more you’re priming their subconscious to remember your brand. This helps when a person is finally ready to make a purchase.

Native vs display advertising - What is the difference?

1. Goals

The end goal of both native vs display advertising is to generate business.

But, looking at a micro level, the goal of native ads is to reach people with the function of having them perform a certain action such as clicking a link, visiting a page, signing up for something, or making a purchase.

Native ads aim to target people at all stages of awareness and depending on where these people fall in your funnel, they should be delivered the right kind of ads that incite the right action.

The goal of display ads on the other hand is to increase the impressions of your brand and reach as many unique people as possible.

The aim of display ads is to get in front of your audience as much as possible so you can build a top-of-mind presence for yourself.

2. KPIs

Native vs display advertising will have different KPIs depending on the type of ad campaign you’re running. Native ads are broadly divided into the following objectives - Build awareness, get traffic, increase engagement, and get conversions like leads or sales.

Depending on either of these objectives your native ads will have different metrics to show performance such as the number of impressions, number of unique people reached, number of clicks, number of visitors, click-through rate, cost per lead, cost per action, and so on.

The KPIs for display advertising is often the number of impressions it can generate across the web for you and another metric known as Display Impression Share (DIS) which tells you the percentage of your potential audience that your ads are being shown to.

3. Channels

Native ad channels are not less but very few are popular across the world making them the go-to platforms to advertise on.

These include the big social media channels such as Facebook, Instagram, Twitter, LinkedIn, TikTok, Snapchat, etc. Search engines like Google and Bing are also popular native ad channels. 

Display ads on the other hand are executed through particular channels but show up on different parts of the web such as websites that receive a lot of traffic and they have listed themselves to provide ad space.

These can include anything from e-commerce stores to publications and news websites.

4. Benefits

The benefit of native ads is that you can run many objective-based campaigns depending on what your business needs at the moment and hence get the most out of your marketing budget.

Native ads also help you in building an audience on a particular channel as a by-product of advertising on it. 

The major benefit of running display ads is of course its ability to reach many people and generate awareness for your brand.

These banner ads act as the perfect priming method to constantly appear in front of your audience and position your brand in a certain way in people’s minds.

5. Challenges

One of the many challenges of native advertising is its volatility. You never know what changes might happen to it. Add to that the competition. Many other businesses are also competing in the ad auction and bidding higher to reach people.

And the obvious challenge is of course that these ads will only get shown to a person when they are browsing the platform that you are advertising on natively.

Display ads face a few similar challenges to native ads including the element of competition to rank higher in the ad auction so that your ads are shown.

Comparing the ROI of native vs display advertising: How do the two strategies stack up?

Native Ads vs Banner Ads; Revenue, traffic & performance of both these types of ads will highly depend on the industry you are in, the kind of products and services you are selling, the competition you have, and many other factors that might not always be in your control

But let’s take a look at how native vs display advertising stack up against each other when it comes to the average returns they typically give to advertisers.

1. Display Ads

Display ads have a low click-through rate - Given that these ads pop up on the side when a user is browsing a site, they act more so as banners to be seen and remembered than ads that can be interacted with on a heavy basis.

A user’s intention is to do something else on the site and they are being interrupted in a way by the ad making the click-through rate of display ads significantly lower.

Suited for remarketing campaigns - One way to increase the effectiveness of display ads is to use them to remarket to an audience that has already shown some level of interest in your business.

This could be people who have visited a specific page on your website or consumed content on it for a certain period of time. These metrics show that a person is already aware of your brand and is engaging with it to some level. 

E-commerce companies often use display ads to target people who have abandoned their cart without making the final purchase.

The display ad could show a relevant discount code to help make someone finalize the buying decision. In such cases display ads can be really effective to increase revenue.

Display ads viable to increase visibility - The more often someone comes across your brand the more they are likely to engage with it.

And display ads are a great way to reach more people and increase visibility which in turn leads to an aware audience ready to interact further with your brand.

Perfect for targeting a niche audience - A great aspect of display ads is that a user can be shown ads based on their intent or previous activity towards certain relevant topics or your brand.

2. Native Ads

Higher CTR than display ads - Native ads tend to have a higher CTR because of the similar form and function of the content on the channel that they are distributed on. People are more likely to interact with content that looks and feels like organic content.

Native ads also drive more traffic - A direct result of a better click-through rate is that you get more traffic wherever you redirect users from your ad.

Suited for remarketing campaigns - Native ads can also be used to remarket audiences who engage with your profile or post on the native channel that you have chosen to advertise on. This is a great way to stay within the trusted ecosystem for a user and still retarget them.

Comparatively cost-efficient - Since the click-through rate (CTR) is higher than that of display ads, native ads are great for driving a certain action that helps you develop your business further.

Enhanced brand content can be presented - Native ads have a larger scope in terms of sharing information in the form of text, images, carousels, and videos. Doing this helps an audience trust you more adding to the fact that you are advertising on a well-known platform.

While native ads can be more costly than display ads for retargeting, the money you spend on both if done with well thought targeting and messaging will reap you a positive ROI.

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