Young shoppers are not happy with targeted ads

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Brands are scrambling to get targeted ads onto various digital platforms, but one crucial segment is rejecting those ads in droves.

Millennial and Gen Z shoppers ages 16 to 39 said in a new report from Lithium Technologies that the paid ads in their feeds are turning them off from using some social media platforms. In fact, 74% of this group said they dislike targeted ads on social media.

Moreover, 57% of younger consumers said they had either reduced or altogether stopped the use of some social media platforms because of targeted ads in the news feed.

But on the flip side, 53% of these people said they trust social networks when researching products to buy online, and this includes ads served by the site. But just 29% of Gen X and Baby Boomers agreed.

Finally, 85% of respondents under age 39 said they trust platforms that offer product reviews, such as Amazon or Yelp, compared to 66% of older consumers.

Therefore, brands and retailers must walk a fine line when serving targeted ads because too many of these ads, or ads that are too specific, can actually upset people because it makes them think companies are monitoring their activities far too closely.

To resolve this, companies can be transparent and explain to consumers how these ads work. Many shoppers are not completely opposed to data tracking under the right circumstances. In fact, 47% of U.S. adults are comfortable with retailers tracking their shopping habits through a loyalty card and then selling the data to third parties if the consumers ultimately save money, according to Pew Research Center.

But customers will have to get used to targeted ads because these types of native ads — or ads that take on the look and feel of the content surrounding them — are taking over digital advertising. 

By 2021, native display ad revenue in the US, which includes native in-feed ads on publisher properties and social platforms, will make up 74% of total US display ad revenue, up from a 56% share in 2016, according to new BI Intelligence estimates based off historical data from the Interactive Advertising Bureau (IAB) and PwC, as well as IHS.

The rapid uptick in native's share of display ad revenue can largely be attributed to the dominance of social platforms like Facebook and Twitter — which were early champions of native and rely almost entirely on native formats — as well as the introduction of new programmatic technologies that are making it easier for publishers and advertisers to scale native campaigns. 

Margaret Boland, research analyst for BI Intelligence, Business Insider's premium research service, has compiled a detailed report on native advertising that breaks out native ads into three categories: social native, native-style display, and sponsored content (also referred to as premium native). It provides forecasts for how revenues from these formats will grow over the next five years and looks at what factors, in particular, are driving up spending on each of these ad units. As a note, because revenues from these three types of native content can overlap, it does not provide an overall native forecast. Finally, it lays out some of the challenges that face properties that rely on native ads, namely ad frequency and scalability issues.

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Here are some key takeaways from the report: 

• Native-display ads, including social native and native ads in-feed on publisher websites, will make up the bulk of native ad revenue from 2016-2021. Native display ad revenue in the US will rise at a five-year compound annual growth rate (CAGR) of 17% during this time period to eclipse $36 billion. The rise of native video ads, particularly on social platforms, will be one of the main drivers of this growth.  
• Social platforms generate most of their revenue from native ads and will continue to dominate overall native ad spending through 2021. The dominance of social platforms like Facebook, Instagram, Twitter, and Snapchat on mobile devices, where the entire experience is within a feed, will help propel social's contribution to overall native ad revenue through 2021.
• Sponsored content, which is categorized separately from native-display due to the direct relationship between publishers and brands in creating the format, will be the fastest-growing native format over the next five years. However, the high cost to produce these ads and the limitation in inventory will limit the format. 

In full, the report:

• Forecasts US native ad revenue growth from 2016-2021 through three separate forecasts: native-style display, social, and sponsored content. 
• Identifies the major drivers of native ad revenue growth. 
• Discusses key players within each category that are contributing to the rise of native. 
• Presents some of the challenges of wide-spread native adoption with BuzzFeed as a prime example. 
• Lays out future opportunities for native ads, including virtual reality, messaging apps, and TV. 

To get your copy of this invaluable guide, choose one of these options:

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The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of native advertising.