The terrorist attacks of Sept. 11, 2001, had a dramatic impact on innumerable industries. One of the less obvious impacts was that felt by advertising agencies. As a nation, we stopped traveling, and we curbed our spending. As a result, the advertising agencies that supported the businesses we normally patronized felt the effect. Firms pulled their advertising campaigns in reaction to a lower level of consumer activity and waited for the nation to recover. And while that recovery has occurred, the continuing conflict in Iraq and other economic constraints have made it slower than one might expect.
The big advertising firms saw the clients' ad buys shrink, but the smaller firms supporting regional companies and communities really felt the change. Only in the last two years have things started to improve.
The advertising industry has an interesting history. Beginning in the mid 1800s when independent agents sold newspaper space, they took on additional responsibility for writing and designing the ads. In 1841 Volney Palmer opened his offices in Philadelphia and received a 25 percent commission from the city's newspapers. After Palmer's death, Joy, Coe & Company took the business and renamed it to Coe, Wetherill & Company, the firm that later became N.W. Ayer & Son, now the oldest advertising agency in the nation.
Increased commercial and industrial activity following the Civil War facilitated the growing acceptance of advertising as a sales tool. Advertising legend J. Walter Thompson had his start in the industry about this time and transformed magazines into another entire advertising industry.
By the 1890s, the advertising industry gained momentum due to the increased use of brand names and trademarks. For instance, only 121 trademarks were registered with the United States Patent Office in 1871. By 1875 that number had grown to more than 1,000 and by 1906 to more than 10,500. In addition, free newspaper delivery to rural areas exposed the entire country to national advertising campaigns.
By the 1920s advertising agencies had become professional entities in their own right.
Perhaps the most significant indicator of the increasing prevalence of the advertising industry was soaring ad budgets. For instance, Coca-Cola spent $11,000 on advertising in 1893; by 1928 its ad budget had grown to $5 million. Campbell's Soup spent $4,000 on advertising in 1899 and $2.5 million in 1928. Wrigley started advertising its chewing gum with only $32; 10 years later its ad budget had reached $3 million.
In addition, radio became a significant advertising medium during the 1920s with the formation of NBC in 1926 and CBS in 1927. Most of the big, nighttime radio programs were actually created by advertising agencies and were used as a way to communicate their client's message. Advertising agencies also created daytime radio dramas. The Blackett-Sample-Hummert agency produced such programs for its client, the consumer products giant Procter & Gamble, and aptly named the programs "soap operas."
The second revolution in advertising occurred in 1948 with the advent of television. As new product categories proliferated, the over-whelming reliance on television advertising made millions for ad agencies. From 1976 through 1988, total U.S. ad spending grew faster than the economy as a whole. Meanwhile, the three television networks, which completely dominated the market, demanded and received continual advertising rate increases.
An industry downturn began in 1988. Consumers became less receptive to the continual assault of commercials and also became more price conscious and less brand loyal. The days of a "Colgate family" or a "Crest family" effectively ended, as large numbers of shoppers bought primarily on the basis of price.
Advertising agencies responded to these changes by expanding their services into new areas and developing new specialties like direct marketing and, later, Internet services.
If television was the second revolution in the advertising industry, few would argue that the Internet represented the third revolution.
The World Federation of Advertisers recently reported that the role of television in advertising will change over the next 10-15 years as the Internet continues to take precedence over television for our entertainment and information hour. For instance, the Internet currently takes 33 percent of the U.S. consumers average viewing but carries only 5 percent of the spend from advertisers. In addition, new technologies allow viewers to skip commercials, so those who market must be prepared to address consumers on their terms.
Another interesting feature of the Internet is that use of the medium has reached parity between men and women who know go online in equal measure. However, young women age 18-29 are more likely to use the Internet than young men. And, at the end of last year, ACNielsen announced that 627 million people (one-tenth of the world's population) have shopped on the Internet to purchase everything from video games to airline tickets.
Clearly cyberspace is the next frontier for consumers and likely the richest frontier for advertisers and the agencies that support them. Agencies would be wise to study the Internet advertising revolution and bring individuals on staff who are comfortable crafting online advertising strategies.
Authored by: Mary Paulsell, Associate Director, University Center for Innovation and Entrepreneurship, Columbia, MO
Date Reviewed: 9/8/06
