Native monetization is deriving revenue from a platform in a way that is unique and organic to the experience.  It’s the reason why Twitter, Facebook, Foursquare, and BuzzFeed avoid just slapping banners anywhere they can fit them.

The theory behind these avoidances is that users will be happier with advertising or forms of revenue generation that fit into the context.  And if users are happier, the platform will continue to flourish.  I also believe that native monetizations works better for the advertiser or sells more of the product.

For Starbucks, the platform is the communal gathering space, or what Ray Oldenburg called a “third place” (the first place being home and the second place being work).  Starbucks could charge people to work and socialize in its spaces, that would be direct monetization, but it would discourage people from frequenting and probably not sell that well.  Instead, Starbucks recognized the platform is socializing, and a native experience that comes with socializing is drinking coffee.  Native monetization for Starbucks third places is selling the coffee, and this sells more coffee as people freely linger.

Google generates search results, so the native corollary is sponsored results.  Facebook lets people to “like” or “fan” advertisers.  It’s also allowing brands to sponsor the status updates users are making to one another.  Twitter lets brands sponsor the actions and aspects of the platform, tweets and trends, that existed before monetization was even a glimmer.

Users would tolerate banners on these platforms, but they wouldn’t like them, and they certainly wouldn’t perform that well.  So these wise platforms look for their interactions that users already gravitate towards in an unpaid fashion and layer paid on top.

What’s made Twitter’s sponsored trends in the new release of the iPhone app so controversial is that it doesn’t feel that native. These sponsored trends in the app are not really tied to anything and don’t feel organic to the experience; they’re banner ads in hashtag clothing.

Native is better but it isn’t easy.  There are no IAB standard formats in the world of native.  To do native, you need your products, and in most of the cases I’m referencing advertisers, to do what the organic users do.

You need advertisers creating search results, tweets, Foursquare locations or badges, and Fan pages before they can pay to promote them.  So it’s a two stage process: get brands to engage in the platform as an organic user does and then pay to promote.

In the case of BuzzFeed, we only accept branded content advertising.  This means no ads that are simply: “buy this stuff.”  Our advertisers bring stories and messages in the form of videos, images, and articles that are optimized onto BuzzFeed into our main story flow (non IAB “story units” that have thumbnails, headlines, and sub-headlines) and thumbnails.  Branded content on BuzzFeed functions and flows just as the organic content does: based on how viral it is.

We also don’t do skins or takeovers: we let brands create custom buttons and badges to allow users to react to and share content. Again these buttons and badges existed in the organic interactions before we layered on paid.  Native native native.

Luckily, we and most leading advertisers believe branded content to be the future of advertising.  It’s better advertising that users find more engaging: brands lead with a good story and follow with their call to action.

The excitement around a novel platform can make engaging with advertisers easy, but there is still a fair amount of education and dialogue required to get a brand to create a badge, Twitter account, or fan page.

And after that initial on-boarding, a novel platform needs to report and explain its own metrics. Google had to explain CPC vs. CPM, Facebook has to define the value of a fan, Twitter the value of a follower; for us, it’s the value of viral lift and real sharing of branded content from one human to another.

These decisions can be hard in the short run, as they typically involve turning down easy short term money.  For example, how much could Twitter sell a skinned version of its Twitter.com home page for promoting a crispy chicken sandwich?  Or Foursquare, loading a full-screen interstitial promoting a product before the app launches.

 It’s hard to turn down short-term quick revenue, but it’s the hard decisions, the ones that break the mold and serve the user that create the most economic value.