• by Jack Loechner , Staff Writer @mp_research, July 29, 2014

According to a new study by Contently, when the CEO of Chartbeat revealed that only 24% of readers were scrolling down on native ad content on publisher sites, compared to the 71% of readers who scroll on “normal content,” it was an indictment of the quality of sponsored content at large, said Contently, who dug deeper into the problem that Chartbeat’s research revealed.

The study, conducted in June, 2014, asked readers some of the most important questions about how they think about branded content, from what’s conveyed by the term “sponsored content,” to how likely they are to click on it, and how heavily factors like age and education play into those behaviors.

Most publishers assume that readers know what it means when a post is labeled “Sponsored Content.” But the majority of readers can’t agree on one clear answer. While a plurality of respondents believe that “Sponsored Content” means that an advertiser paid for the article to be created and had influence on the article’s content, more than half thought it meant something different.

But that’s not where the confusion ends. Some of the most striking revelations include:

• Two-thirds of readers have felt deceived upon realizing that an article or video was sponsored by a brand
• 54% of readers don’t trust sponsored content
• 59% of readers believe a news site loses credibility if it runs articles sponsored by a brand
• As education level increases, so does mistrust of sponsored content
• And yet, respondents rated branded content as more trustworthy than Fox News, and nearly equally trustworthy as MSNBC, indicating that content has a mistrust problem overall

This study raises a lot of questions for brands and publishers alike, says the report, and was undertaken to provide readers and clients transparency and honesty. And there were signs that poorly executed sponsored content was polluting the ecosystem, as publishers’ widespread assumption that they’re communicating clearly and transparently when they label a post as “sponsored content” may not be true. When asked what they think a “sponsored content” label means when they see it on a news website, the answers varied greatly.

But even if readers don’t understand what branded content means, do they prefer it to the much-maligned banner ad? If you work in digital media, the answer may surprise you. 57% of readers said that they’d prefer that their favorite blogs and news sites run banner ads instead of sponsored articles.

This finding holds up fairly consistently across age groups, says the report. Though digital-first, millennial-focused sites like BuzzFeed have fully embraced sponsored content in place of banner ads, millennials aren’t any more likely to prefer sponsored content to banner ads. Another fascinating demographic result: respondents with graduate degrees were also the most likely to express a preference for banner ads.

One reason readers express a preference for banners, it appears, is a lack of transparency. Two-thirds of respondents said that they’ve felt deceived upon realizing that an article or video was sponsored by a brand.

Ever Felt Deceived Realizing an Article Was Sponsored by a "Brand”

• Yes… 66.6%
• No… 25.8%
• Not aware of seeing sponsored content… 7.6%

Drilling down, the strong preference for banner ads by those with a graduate degree became a little clearer. 77% of respondents with a graduate degree reported having felt deceived upon realizing that an article or video was sponsored by a brand, compared to just 46% of respondents with a high school diploma. As education levels increase, so too does the likelihood of a respondent feeling deceived by a piece of branded content.

Two-thirds of respondents are also less likely to click on an article sponsored by a brand compared to regular site editorial.

When readers do click, how likely are they to trust what they click on? A little more than half of respondents said that they generally don’t trust content from brands. Among those who said that they do trust sponsored content, preexisting trust in the brand, and not the publication, was the biggest factor in doing so, by a factor of 23% to 19%.

Unsurprisingly, says the report, respondents with graduate degrees were nearly twice as likely to distrust sponsored content as those with high school diplomas.

For publishers, this brings up a big question: How is sponsored content affecting the way readers think of them? Are they losing credibility? The majority of respondents said that news sites are losing credibility when they run articles sponsored by a brand.

And the likelihood of feeling that way increases as education level increases, which may be  troublesome to publishers that boast a highly educated readership. This is one area, though, where millennials were more lenient, with only 49% of respondents aged 18–29 saying that a news site loses credibility if it runs sponsored content.

The study asked some baseline questions about content quality, in order to provide some context for how much people view sponsored content relative to other types of advertising and non-sponsored content. People found newspaper and magazine stories of higher quality than your average mommy blog post. What is surprising, however, is that sponsored content and owned content on brands’ websites rank in between those two publishing bookends. Print advertorial is seen as higher quality than online sponsored content, though sometimes seen as less honest. And interestingly, says the report, banner ads are seen as very transparent.

The report concludes by acknowledging that sponsored content is booming, but it’s clear from the survey data that brands and publishers still have a long way to go to earn readers’ engagement, attention, and trust. That two-thirds of respondents reported having felt deceived by sponsored content shows that publishers and brands need to do a better job of indicating when a story came from a sponsor.

The data also reveals that misgivings about sponsored content become more pronounced with education level, which is troubling for many publishers actively selling a highly educated, high-earning audience. And, another survey found that 74% of the general public trusts educational content from businesses on a particular topic, but “even signing off an otherwise objective blog post or newsletter with a product pitch will bring the content’s credibility level down by 29%.”

None of this means that sponsored content is dead in the water, says the report, but that it’s time to get it right.

For more from Contently, please visit here.