In this retrospective article, Rahul Keerthi takes us through the past 25 years of advertising. As the industry moved to digital ads and businesses turned to Google and social media, we look at what has changed – and what hasn’t – in the battle to reach consumers.    


By Rahul Keerthi

Past is Prologue

Advertising – seen and unsighted – surrounds each of us every day, entreating the subconscious to consider a product, an idea, or lifestyles within our reach. Advertising has not changed its purpose in the Internet era: it continues to connect consumers to products and services through their kaleidoscope of needs and desires. The best ad ultimately is one that firmly piques its audience’s interest – its relevance to them matched only by its resonance.

Over the last 25 years, advertising has been a standard-bearer in the digital revolution. Because of its success, advertising-funded traditional print media is facing its greatest ever challenge for survival. Almost every newspaper that had a print edition in the 1990s now has an online equivalent, though the Internet’s greatest contribution to advertising is its disintermediation of mass media. Advertisers no longer rely solely on TV, radio and newspapers to reach the masses – they can now effectively sell their products through YouTubers, Apps, the Twitterati, and bloggers.

If you want to get to the gist of advertising’s journey in the last 25 years, its story is the story of Google. Past is still prologue though, so let’s start there.

Billboards of the Internet

Advertising has first and foremost been a creative industry. The early 1990s saw the development of publishing and graphics applications such as QuarkXPress, PageMaker, Publisher, Fauve Matisse, Lightworks, Adobe Photoshop and CorelDRAW. These gave designers the tools required to efficiently create graphics and layouts for print publishing, and increasingly, online publications.

Unsurprisingly, the first internet advertisements also appeared during this time: first as non-interactive images in 1993, then famously they became hyperlinked - the first banner ad, for AT&T, appeared on Wired magazine’s digital sister publication, Hotwired, in 1994. In a quest to mimic their analogue brethren’s revenue streams, publishers began offering ad space for a fixed time-period on their websites to companies for a fixed fee, not dissimilar to the way advertising on real-world billboards or hoardings worked. 

Prior to this, Internet access was a paid subscription service like any other – Internet Service Providers (ISPs) like AOL offered access to web content as a feature of the product despite the fact that most of this content was neither created nor owned by them. With the introduction of online ads, these billboards of the information superhighway, publishers and content creators could now monetise their content. The going rate was good – Hotwired charged $30,000 (£20,000) for 3 months of ad space – but with 44% of visitors clicking on the ad (43.9% more than an advertiser would expect today!) the idea quickly caught on.

As the Internet grew and speeds increased in the late 1990s, e-commerce and entertainment sites proliferated, as did space for and revenues from advertising. The race for eyeballs was on. Pop-up ads, a common complaint of modern browsing, started appearing then, as did the tools to block them. This battle has continued to today, a game of one-upmanship that appears to have lost sight of what the relationship between advertising and consumers should be.

In the early 2000s, broadband speeds created the media-rich Web 2.0. Advertising, ever-diligently, took the initiative by using embedded audio and video, as well as more interactive advertising. Big brands began pouring money into elaborate digital campaigns and the quest for eyeballs became every advertiser’s obsession and every agency’s nightmare. This frenzy hit its peak in 2005 when Wiltshire student Alex Tew created a website to sell each pixel of a 1000-by-1000-pixel image to advertisers for $1 per pixel. This was the “Million Dollar Homepage”[i], and it made Alex a millionaire in 5 months[ii].

The Big Game Safari

This was a drop in the online advertising ocean, however. By then, a Palo Alto start-up called Google had a market capitalisation of $52B[iii], larger than the GDP of 52 countries at the time including Cuba, Uruguay and Luxembourg[iv]. Its revenues were over $6B in 2005, with 99% coming from its advertising products[v].

What had started out as yet another ambitious search engine, attempting to help people navigate the increasingly chaotic and disparate Internet, had quickly become the de facto gatekeeper to the information superhighway – and all the billboards on it.

Advertising - Google Market Share.jpg

[vi]

David Ogilvy, often celebrated as the father of modern advertising, had several tenets of which one was, “Never stop testing, and your advertising will never stop improving.” Testing was difficult in the print world. You ran focus groups, you tried to sense the zeitgeist, but once launched, a campaign had to be stuck with until the end.

The Internet, on the other hand, was both a laboratory and arena for advertisers. Advertising wisdom suggests you learn how lions feed by watching them in the wild, not in the zoo, and here they were presented with a big game safari park – the best of both worlds. Advertisers could experiment in the Internet lab and the Internet arena would immediately show what works and what didn’t.

Where Google co-founders Eric Schmidt, Larry Page, and Sergey Brin struck gold was the realisation that the logic behind its relevant search results could also make ads more relevant to users and much more likely to lead to a click (its PageRank algorithm was based on the premise that more important websites are likely to receive more links from other websites). This logic took shape as Google’s Quality Score, which valued not just how much was paid for an ad in an auction (as other search engines did), but also how relevant the ads were, judged continuously by how often they were preferred by searchers.

The Quality Score algorithm powered its two key products, Adwords (ads on search results pages) and Adsense (ads on third-party websites) – both runaway successes for the company to this day. Search Engine Optimisation (SEO) as an industry was born out of a need to maximise ROI from advertising products like these. The growing complexity and continual innovation of the algorithm is testament to how fundamental it still is to Google’s business model– despite its massive diversification into other products, advertising still accounts for more than 90% of Google’s revenues today.

Needs, Wants, Intentions, Identities

Google later acquired DoubleClick, a small New York Internet start-up, which pioneered the tracking of digital advertising campaign success in near real-time, allowing advertisers and agencies to shorten unsuccessful campaigns or redirect spend to more successful websites. It also enabled targeted advertising by making inferences about user interests by their characteristics. This was a new watershed – advertising was no longer just about what you needed, it could now be about what you might want based on what else you were interested in.

Facebook, like Google in the search engine world, came to dominate social media in the late 2000s. Their revenues today are primarily from advertising, and their unique proposition has been the ability to use the information you voluntarily offer them (e.g. interests, locations, age) to offer advertisers a level of targeting not possible elsewhere: voluntary participation, flexible segmentation (e.g. Oreo lovers aged 35 to 49 in West London), hundreds of attributes, and accurate real-time measurement. Twitter, another social media maven, offers relative anonymity and gathers little data from users; it has unsurprisingly struggled to grow its advertising revenues relative to usage.

Gathering swathes of data for painting ad targets can be concerning – how much is too much? What else could they do with this data? Is it safe? Advocates for privacy and consumer rights have pushed back against this perceived intrusion into our lives, aiming to strike a fairer balance in an advertising economy where the prevailing wisdom is, “if you aren’t paying for the product, then you are the product.” However, it seems that people don’t know how their data is used and even when made aware, often simply don’t mind or care.

Bridging Worlds

The Internet, initially designed to be a mere digital Library of Alexandria, has transformed over time into an archipelago of digital tribes – a haven of individual expression and a home to diverse subgroups. In this new world, customers segment themselves on Facebook more effectively than a marketing strategist ever could; they articulate purchase intention on Google more clearly than any salesperson could hope for; they spread ideas on Twitter quicker than any branding guru might imagine.

While advertising is as much a part of our digital lives as it is our real-world ones, new technologies such as augmented reality and virtual reality will aim to bridge those two in surprising and useful ways. Despite all these advances in technology and relevance, advertising itself remains a creative practice – technology cannot (yet) write you good, resonant copy.

“If you have all the research, all the ground rules, all the directives, all the data… you’ve [still] got to close the door and write something — that is the moment of truth...” - David Ogilvy <>

To mark Cartesian’s 25 years in the telecoms, media, and technology sector, we asked our consultants to reflect on industry topics and write about how they have changed over the last few decades. Click here to receive your copy of our anniversary eBook: 25 Years – A retrospective on innovation in the telecoms, media, and technology sector


Notes:

[i] The Million Dollar Homepage™

[ii] Richardson, Tim. “Pixel-flogging student makes a million.” The Register, 16 Jan 2006. 

[iii] Alphabet Inc. (GOOG). Historical Prices, Monthly, Dates: 19 Aug 2004-1 Dec 2005. Yahoo Finance. 

[iv] GDP at market prices (constant 2010 US$), 1960-2005. The World Bank. 

[v] Distribution of Google’s revenues from 2001 to 2015, by source. Statista. 

[vi] Pollock, Rufus. Search Engines Market Share. Last Updated: 11 Oct 2013. Datahub