The report urges transparency and the "clear signposting" of sponsored content.
Native advertising has been much discussed in the past couple of years and is used by sites such as BuzzFeed, which is reportedly charging $10 per 1,000 impressions on a sponsored story, while a standard rate for a banner ad impression is between $1 and $2 per 1,000.
Examples include the 20 coolest hybrid animals, created as advertising for hybrid car Toyota Prius. Brands create and sponsor content "that people want to click on", as BuzzFeed founder Jonah Peretti described it at the launch of BuzzFeed in the UK.
The new definition
The report also proposes a definition of "sponsored content, which is relevant to the consumer experience, which is not interruptive, and which looks and feels similar to its editorial environment."
The report's conclusion is that sponsored tweets are not native advertising. "It is native to the platform but it is not relevant to the consumer," Steve Payne, head of commercial planning at AOL and Huffington Post Media Group, said when presenting the white paper at an event in London this morning.
Five 'golden rules'
Researchers interviewed media owners and consumers, and the report proposes five "golden rules" of native advertising:
1. Tell a great story
"Great native advertising is written by an editorial team," Payne said.
2. Be entertaining
The report found those in the 18 to 34 age category were more likely to engage with sponsored content and names this group "Generation N". These people are "crying out for entertainment", the report states.
3. Align with consumers' interests
The report suggests publishers "tap into passion points" of readers.
4. Be relevant to current online activity
"Don't interrupt" the reader, the report urges
5. Be clearly signposted
"Don't try to fool anybody," the report states.
Payne referred to the example of The Atlantic publishing sponsored content on Scientology, which AdWeek reported had "violated the spirit of native advertising by giving a platform to a controversial institution". After complaints posted on social media, The Atlantic admitted that it "screwed up", removed the post and sharpened its own native ad guidelines, which includes reference to the way sponsored content is marked as such online.
Opportunities and concerns
The report adds that "there is a huge opportunity here for media owners to find ways to increase revenues".
"They also need to choose partners carefully – the content will carry the trust and reputation of their media brand. Sponsorship needs to be flagged clearly and an environment created to foster interaction between consumer and brand."
The research asked different age groups what their main source of news was. For younger people in the 18 to 35 "Generation N" age group, the main news source was found to be online. They "tend to see value in native advertising", Payne said. "And they take their habits with them as they grow up".
Native advertising will become favoured over traditional advertising by 2025, Payne predicted.
Native at the Huffington Post
Carla Buzasi, editor-in-chief of the Huffington Post, explains in the report "why native advertising is already working" for the outlet.
"There are actually brands out there who want to reach that young audience and cannot find them anywhere else," she says.
At the event this morning Buzasi used the example of an campaign the Huffington Post carried for Iceland, with the country promoted as a destination not in a travel section but in lifestyle, with the key theme being "inspiration".
Asked by Journalism.co.uk how the Huffington Post team is organised in terms of producing sponsored content, Buzasi explained that there is a clear divide between the editorial team and the "commercial editorial" team, with the latter consisting of people with editorial backgrounds writing content on behalf of brands.
'The editorial age'
In his book The Editorial Age, Ebele Wybenga goes further that the AOL and Huffington Post guidelines by proposing that all sponsored content should include a byline, which he argues increases transparency.
Speaking at the World Publishing Expo a fortnight ago, Wybenga said a byline is "a sign that it is in accordance with your conscience".
"If there is no byline, the public will know the reliability is low," he added.
Asked whether the Huffington Post would consider adopting such a rule, Buzasi said it "sounded sensible", explaining the online news title was transparent and clear in its signposting of agency copy, for example.
The Huffington Post has launched a "native page" where the white paper has been published and where it also plans to host a discussion around native advertising.