Native Advertising Effectiveness Under in Newsfeed Apps

Abstract

<p>Although newsfeed advertising is increasingly popular among marketers, it has received limited attention in the marketing literature. We are interested in three related research questions: (1) What are the distinct states of consumer newsfeed browsing behaviors? (2) How do consumers in each behavioral state react to newsfeed ads? (3) How do newsfeed ad features affect reactions to ads in each of the behavior states? This research reveals the effects of two newsfeed ad features—relevance (the consistency between the post and consumers’ interests) and organicity (the extent the post looks like organic posts)—on two advertising outcomes: the click-through rate and dwell time. We use a hidden Markov model to model the consumer’s sequential clicking and reading decisions while accounting for the endogeneity of newsfeed selection. We apply our framework to unique clickstream data with more than 395,000 newsfeed posts from a leading newsfeed app. We identify three consumer states of browsing behaviors: <em>Title skimming</em>, <em>Variety seeking</em>, and <em>Focus reading,</em> and we show that the effects of ad relevance and organicity on clicking and reading decisions vary with the behavior states. Finally, our post-hoc simulation shows that feeding ads that are optimal for each consumer’s behavior states can increase the click-through rate by roughly 26% to 170% and the dwell time by roughly 7% to 50%.<br></p>