Abstract: Native advertising is a type of online advertising that matches the form and function of the platform on which it appears. In practice, the choice between display and in-feed native advertising presents brand advertisers and online news publishers with conflicting objectives. Advertisers face a trade-off between ad clicks and brand recognition, whereas publishers need to strike a balance between ad clicks and the platform’s trustworthiness. For policy makers, concerns that native advertising confuses customers prompted the U.S. Federal Trade Commission to issue guidelines for disclosing native ads. This research aims to understand how consumers respond to native ads versus display ads and to different styles of native ad disclosures, using randomized online and field experiments combining behavioral clickstream, eye movement, and survey response data. The results show that when the position of an ad on a news page is controlled for, a native ad generates a higher click-through rate because it better resembles the surrounding editorial content. However, a display ad leads to more visual attention, brand recognition, and trustworthiness for the website than a native ad.
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