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Advertising History

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 Encyclopedia of Journalism
Christopher H. Sterling Editor
Sage Publications, Thousand Oaks, CA

ADVERTISING HISTORY
by Jef Richards, Terry Daugherty & Kelty Logan

Advertising is ubiquitous. It surrounds us, it lands in our mailbox (both real and virtual),

and it interrupts our favorite forms of entertainment. To truly understand it, though, we need to

first define what it is and what it is not.

Definition of Advertising

Advertising is “a paid, mediated, form of communication from an identifiable source,

designed to persuade the reader to take some action, now or in the future.” The term “mediated”

means, simply, that some medium like television or newspaper or even the Internet conveys the

message from sender to receiver, as opposed to direct “in-person” communication. The term

“identifiable source” distinguishes advertising from wholly anonymous communications, such as

those found in some unsolicited e-mail. The “action” can be buying a product or service, but it

also can be directed at voting behavior during an election, or it might even entail not-for-profit

social behavior like recycling, saving your money, saving the whales, or preventing abortion.

Of course, one aspect of this definition that clearly makes it stand apart from most concepts

of journalism is the phrase “designed to persuade.” Its persuasive purpose is unambiguous, yet

advertising does have strong ties to the field of journalism.

Relationship to Journalism

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 In the United States, mass communication evolved with limited government involvement.

Instead, the U.S. mass media developed employing a for-profit model funded predominantly by

advertising. The result is a symbiotic relationship of media and advertising, whereby people rely

on the mass media for information and entertainment, and the media depend on audiences to

attract advertisers. Most media cannot financially survive unless they are able to deliver an

audience that advertisers want to reach. As a consequence, advertising-supported media

evaluates content success on the basis of audience delivery. In spite of this dependence on

advertisers, and while advertisers do have some influence regarding media content, most media

organizations strive to maintain a strict separation between advertisers and journalism content.

Advertising, it can be argued, actually was born of journalism’s need for economic support.

As a separate industry, advertising emerged just over a century and a half ago.

Advertising Agency Evolution

In 1841, Volney Palmer of Philadelphia became the first newspaper advertising sales agent.

He had worked for a newspaper, selling advertising space, but realized the benefits of

independently buying and re-selling prime newspaper space. So he opened the first advertising

agency. In 1875, N.W. Ayer became the first agency to charge commission based on the "net

cost of space." And by the end of the 19th century, advertising agencies such as J. Walter

Thompson and Lord & Thomas (the predecessor to today’s FCB/Draft agency) began to develop

and produce advertising for their clients (the “advertisers”) in order to add value to their media

buying operation.

The role of advertising agencies has evolved with changes in media technology. When radio

became broadly available in the 1930’s, advertising agencies created a new way for their clients

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to sell products, with programs like the Lucky Strike radio show. Advertisers were program

sponsors and their advertising agencies developed and produced the programming. Hence, the

term “soap operas” reflects the fact that the early radio daytime dramas were owned by Procter &

Gamble. The advertising sponsorship model also ensured that radio programming was primarily

entertainment-driven in order to attract large audiences.

The growth of television during the late 1940’s had a dramatic effect on the advertising

industry. While it was financially feasible for advertising agencies to produce radio

programming, the cost of television programming posed a serious profit challenge within the

agencies’ commission structure. Many did make the transition. For example, the Kraft

company began sponsoring the Kraft Television Theater in 1947. Indeed, by 1950 sponsors were

moving en masse from radio to television. The game show scandal of the late 1950s, though,

marked the real end of this approach, as some sponsors were condemned for manipulating the

outcomes of those games.

Subsequently, advertisers began abandoning program sponsorship in favor of buying smaller

segments (e.g., 60 seconds) of advertising time in multiple programs and across multiple media.

As a consequence, the “all-media” advertising agency structure was established. Agencies

divested themselves of programming and production responsibilities and focused on the

development of advertising and the purchase of media.

Another structural change within the advertising industry occurred during the 1980s and

1990s. Consolidation of media empires, together with the rise of cable television networks,

created a demand for a new kind of expertise as agencies sought to buy media time and space for

advertising. Suddenly, media buyers were negotiating with companies that bundled media, such

as television ad space, magazine ad space, product placement opportunities, and participation in

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media events. Cost savings could be realized by buying a combination of media. In order to

increase their negotiating strength, media buying operations needed a broader base of clients

with a wide range of media needs. It was not possible, however, for the media departments to

acquire new clients without risking conflicts of interest with existing clients. To avoid potential

client conflicts, many advertising agencies separated from their media buying operations,

allowing them to operate independently with an independent client roster. While most

advertising agencies have maintained control of media planning, the separate media buying

agencies are assuming greater planning responsibility.

Advertising agencies, however, are not the only part of the industry to change. Some of the

most striking changes are found in the content of the advertisements they create.

Seeking a Better Message

Research into advertising effectiveness, since the 1890s, has affected the way

advertisements communicate with audiences. Early efforts were crude by today’s standards, but

in 1904 John E. Kennedy defined advertising as “salesmanship in print.” This concept drove

message creation, as advertisements emulated the pitches of salesmen.

Unique Selling Proposition. Half a century later Rosser Reeves introduced the concept of a

Unique Selling Proposition (USP), where an advertisement highlighted a specific benefit that

distinguished a product from its competition. Reeves believed the role of advertising was to

make consumers aware of these unique, product-based differences. This strategy remains

effective when marketing a product that provides an obvious difference from competitors.

Increasingly, however, product-based advantages are both marginal and difficult to sustain.

This is primarily due to product proliferation. Consider, for example, the number of brands and

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forms of laundry detergent shoppers encounter. Detergents are differentiated not only on format

(powder versus liquid), additives (with fabric softener, with bleach, etc.), or cleaning power

(tough on dirt, gentle, etc.), they also are differentiated on smaller and smaller distinctions, like

scent. While the fresh scent of lavender may be a distinct attribute, it may not motivate

purchase. So, as the differentiation between products became less significant, more advertising

was focused on differentiating consumers rather than products.

Market segmentation. Another advancement during the 20th century was the concept of

market segmentation. Rather than market a single product to a broad audience, advertisers began

focusing on how a brand could uniquely satisfy the needs of a specific group of consumers.

Consumer needs vary by lifestyle, attitudes, or even aptitudes. An urban teenager obviously has

different wants and needs than a suburban soccer mom, so they likely use different criteria when

evaluating cell phones, athletic shoes, and fast food. Depending upon the advertiser’s intended

audience, its “target market,” the advertising message may promise different benefits or even use

different language, graphics, and media.

As media became more fragmented, for example going from the three or four television

stations in the 1960s to hundreds just four decades later, targeting a message to a specific market

segment became easier. And the emergence of “addressable media” such as direct mail and

Internet marketing made “narrowcasting” – targeting a narrow audience – an increasingly

efficient and effective way to target specific groups. Then, effectively combining segmentation

with the USP approach, in the 1970s Al Ries and Jack Trout introduced the concept of

“positioning.”

Positioning. The idea here is to place the product in a specific context, or position, in the

consumer’s mind. For example, rather than compare gas mileage or acceleration, Volvo

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positioned their cars as the safe choice for responsible parents. Any parents who want a safe car

to protect their children may search that “position” in their memories dealing with all things

about safety, and they should recall that Volvo was linked with safety.

Over the past century there is little doubt that advertising messages have improved and

become more sophisticated. While this may provide satisfaction to advertisers, it provides little

comfort to those who fear that advertising has negative effects on our society.

Advertising Effects

Advertising serves four functions in business and society. It is a marketing tool, a

transmitter of information, an economic stimulant, and a purveyor of values. As part of

marketing, advertising communications information about goods and services. It also adds

product value by creating enduring “brands.” Successful marketing campaigns stimulate demand

and subsequent economic growth. But because advertising is so pervasive, there are concerns

regarding its effects on society.

Societal Impact. Among other concerns, critics of advertising believe it promotes

materialism and encourages consumers to buy products they do not need. They also argue that

advertising manipulates, perpetuates stereotypes, preys on children, is used to sell harmful

products, and contribute to a variety of other social ills. Those who defend advertising note that

advertising is merely a tool, a form of communication that can be used for good as well as bad

purposes, depending upon the advertiser. It is used not only to sell products, but also to gain

donations for charities, as well as for other causes. Indeed, it is an enormous industry, and it

frequently is defended by noting its economic contribution to society.

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 Economic Impact. Advertising is a global industry. In the United States alone, over $290

billion was spent on advertising during 2007. U.S. advertising revenues have accounted for

approximately 2% of the GDP since 1950. Procter & Gamble, the leading advertiser, alone spent

$5 billion during 2007. These expenditures affect everyone involved in advertising, including

the advertisers, their agencies, and the media companies that provide advertisers with an

audience.

In addition to the money poured into the economy, for the free market to work properly

consumers must be sovereign, able to freely make informed decisions in a competitive

marketplace. Advertising is necessary to provide that information and enhance competition.

Furthermore, advertising reduces the time and cost for consumers to gather this information.

While critics suggest that advertising costs are passed along to consumers in the form of

higher prices, in many cases it actually reduces prices by increasing sales volume. Increased

consumer demand contributes to the economies of scale that reduce production costs and,

consequently, consumer pricing. Although critics often believe advertising costs are a barrier to

entry for new products, by increasing consumer demand advertising actually can stimulate

competition in many cases. And advertising can stabilize business cycles by generating uniform

product demand and avoiding disruptive seasonal spikes and declines in volume, further

reducing costs.

It also can enhance product quality. By creating broad awareness of new products

advertising encourages the diffusion of innovation, or adoption of new technologies, thereby

ensuring a steady stream of product innovation and improvement. In other words, advertising

encourages the introduction of new brands that compete on the basis of price or improved

product attributes.

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 Finally, advertising lowers media costs, allowing consumers to enjoy quality information

and entertainment at a fraction of the production cost. For instance, “free” media such as

broadcast television, radio, and the Internet would not exist as we know them today without the

support of advertising, and “pay” media such as newspapers, magazines, and cable TV would

cost as much as ten times current prices.

These economic benefits help justify the need for advertising, but that does not mean it

should be entirely unregulated. Both government and industry play important roles in

controlling advertising’s excesses.

Law and Ethics. Because this is a communication industry, the First Amendment of the U.S.

Constitution limits government’s role in regulating advertising. There are, however, regulatory

standards imposed by government to ensure fair competition and protect consumers from

deception. The Federal Trade Commission (FTC) is the primary federal agency governing the

advertising industry. The FTC is focused on eliminating advertising deception. The Federal

Communication Commission (FCC), too, is involved through its oversight of broadcast media.

In its role, the FCC maintains a certain level of decency and decorum, having the authority to

fine broadcasters for violating mandated standards. The Food and Drug Administration (FDA)

also plays a role, monitoring claims regarding food and drugs.

In addition, industry has created a major self-regulatory mechanism designed to supplement

government regulation. The National Advertising Review Council (NARC) accepts and reviews

consumer complaints about advertising. It has created a process for charging advertisers with

violating accepted standards, judging their compliance, and enforcing subsequent corrective

actions.

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 Regulation and self-regulation are no less needed for advertising than for any other industry

of its size and complexity. Indeed, it is complex. There are many different parts that must work

together to make advertising.

Areas of Advertising

Historically, advertisers worked with what are now called “full-service” advertising

agencies. Full-service agencies provide a range of services to their clients, including research,

marketing, creative, media planning, media buying, and advertising production. In recent years,

though, more and more advertisers have taken an ala carte approach, seeking agencies that

specialize in a narrower segment of the business. Those traditional segments include account

management, research, creative, production, and media.

Account management. Account executives are the interface between the agency and client.

Within the agency they represent the needs of the client, pursuing the services necessary to

provide adequate support. This includes working with the client to develop business objectives

for the agency to meet. Once the agency has developed an advertising plan to meet those

objectives, account management must sell the client on the merits of that plan.

Research & Account Planning. Effective advertising is usually based on solid research.

Both quantitative and qualitative research are used to provide information about product use and

performance. Agencies conduct any necessary research through a research or account planning

(also called strategic planning) department. Account Planning is a newer twist on traditional

research departments, and it is seen as representing the voice of the consumer. In this capacity,

the Account Planning team provides consumer insights to the Creative team regarding how the

brand is used and perceived, to help determine the best way to approach the consumer.

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 Creative. The Creative Department is responsible for actually designing the advertisement.

The “creatives” work with the Account Management team to understand the business objectives,

and with the Account Planners to understand how consumers interact with the brand. They then

develop a “creative concept” that will drive the campaign, which one or more art directors and

copy writers then use to guide them in making the advertisements. Ultimately, the client must

approve their work before it goes into production.

Production. Once a campaign is approved, the Creative Department relies upon the

Production Department to produce the final ad. Production departments are responsible for

recommending production companies and directors, negotiating contracts, and overseeing all

production budgets. They work closely with the Creative Teams to ensure that the final ads meet

client expectations.

Media Planning & Buying. For advertisements to work, they must be seen by a number of

prospective customers. The Media Department must develop a plan that delivers the necessary

consumer exposure within the confines of the client’s budget. It recommends the media that

should be used and the schedule to be followed to achieve each client’s objectives. Because

budget is the ultimate constraint, media prices are crucial to planning. Agencies that secure the

best pricing can deliver more powerful plans. Consequently, agencies have arisen that do

nothing but media buying. While most advertising agencies have maintained media planning

departments, these specialty media buying agencies have assumed a greater role in recent years.

Alternatives. In addition to media buying agencies, clients have turned to a number of other

alternatives to the full-service agency. Newer options include industry-focused agencies that

specialize in certain subject matters like health care, while minority agencies provide clients with

greater expertise concerning specific racial or ethnic targets. Interactive agencies provide

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corporate and brand website development, as well as expertise regarding all aspects of interactive

marketing. Creative boutiques focus on creative planning, development, and execution. Even

large multinational agencies have begun positioning themselves as creative boutiques.

The Purpose of Advertising

Any advertising agency is charged with creating a campaign to serve the needs of its client.

Because those needs vary, the purpose of each campaign, too, may differ. There are some

constants. Every advertisement must, first, capture attention. Likewise, each must communicate

some information to some targeted audience, and each seeks some reaction from that audience.

Those desired reactions, however, can change greatly from one advertiser to the next. They can

entail anything from emotional response to behaviors of all types.

A simple model of advertising communication breaks this process into six basic elements

(Figure 1). The advertiser, of course, is the source of the communication. The agency encodes

the communication into a message that is shaped by the advertising strategy. The message is

transmitted to the consumer via media. Through exposure to the media, the consumer becomes

the receiver of the message. When the advertising message is decoded by the consumer, the

meaning is interpreted. Finally the consumer may or may not take an action based on the

message, including providing feedback to the source.

Figure 1. Basic linear model of advertising

SOURCE ENCODE MESSAGE CHANNEL DECODED RECEIVER

MESSAGE MESSAGE Target
Advertiser Strategy Agency Media Interpretation Audience

FEEDBACK

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 Advertising scholars and professionals have began to question this linear perspective

though, because it was developed over fifty years ago and both mass media and consumers have

significantly changed. While there always have been forms of advertising that solicited feedback

– primarily direct response advertising – the emergence of interactive media has made consumer

feedback an integral part of the marketing mix. It is rapidly becoming rare to encounter a form

of advertising that does not provide some means of consumer feedback, such as a URL or 800

number.

Clients and agencies evaluate advertising effectiveness on the basis of these key measures.

First, advertising is evaluated in terms of perception: whether consumers remember seeing the

ad. A number of factors contribute to advertising awareness. The choice of media, for example,

can affect how many people are exposed to the advertisement and how many times they see it. It

also depends upon where, within the media vehicle, the advertisement is located. Beyond

exposure, there are creative elements that can effectively attract attention. The use of humor, a

well-known celebrity, or a frightening headline, for example, will generate interest if the specific

tactics are relevant to the target audience. In fact, the more relevant the message, the more likely

the target audience will pay attention. Advertising memorability is most often measured in terms

of recall and recognition, and significant research has been conducted to discover how best to

guarantee memorability.

Second, the advertising message is evaluated in terms of learning: whether consumers

understand the message. There are many strategies employed by advertisers to ensure

comprehension. To generate cognitive learning the communication must provoke a thoughtful

response by the consumer. Cognitive ads are very effective when attempting to reassure those

about to spend a lot of money on an insurance policy or a new car. Associative learning, on the

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other hand, is achieved by repeatedly associating a brand with a specific image. This tactic is

common in advertising. Consumers can learn to associate certain celebrities or images with

specific brands, for example. Products that are “high involvement,” where consumers are

motivated to expend significant energy on gathering and processing information, are more likely

to be sold through the Cognitive approach. “Low involvement” products, where consumers put

far less effort into thinking about the purchase, generally rely on the Associative approach. Like

awareness, comprehension is easily measured.

Third, the advertising is evaluated in terms of its persuasiveness. Advertising can establish,

reinforce, or change consumers’ opinions and attitudes regarding the brand. This is more

difficult than simply communicating information, but it is a condition precedent to purchase. An

advertisement that positively affects attitude thereby increases probability that the consumer will

develop an intent to purchase the brand. While intent to purchase is a measurable response, it is

not proven to correlate with purchase for a number of reasons. For example, the consumer may

fail to find the brand at a local store. Also, intent can be created by something other than the

advertisement, such as a friend’s recommendation. Consequently, measurement of intent is not

necessarily an assessment of the advertisement’s effectiveness.

The final and most often used measure of advertising effectiveness is consumer behavior:

whether consumers buy the brand. But unless the advertisement is the only possible source of

information, this generally is a poor measure because it is impossible to know that purchase was

caused by the advertisement. Client insistence on some indication of Return on Investment

(ROI), though, make measurements of purchase behavior common.

The Future of Advertising

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 Society today is facing numerous changes in mass media that will continue to affect the

creation and delivery of advertising. One ongoing change is that society has shifted away from a

very limited number of mass media sources to an almost limitless range. This change has

occurred because traditional above-the-line media, such as television, radio, newspapers, and

magazines, have splintered into vehicles that target specific demographic segments. For

instance, the once dominant medium of television has fragmented to where no single channel

commands the share of audience it once did. Newspapers, radio, and magazines are no different,

as there are now thousands of vehicles within each medium targeting special interests, regional

areas, local communities, and global audiences. On top of that, technological innovations have

created new media (i.e., the Internet) and altered existing media. These changes, combined with

a power shift from the sender to the receiver, created a multitude of media choices and altered

how we consume media.

Nevertheless, advertising has survived economic recessions, wars, and industry scandals. It

survives because it plays a key role in American business. The advertising industry proved its

ability to reinvent itself when radio disturbed the media environment in the 1920s and 30s. That

change required advertising agencies to acquire new skills, restructure their organizations, and

make significant investments in talent and technology. Then, when television replaced radio, the

advertising industry again redefined its mission and sought a new and profitable direction. More

recently, the emergence of media conglomerates, cable television, and interactive media has

again altered the advertising landscape. It is possible that smaller, more flexible, agencies will

prove more nimble and able to out-perform their larger counterparts. The large, global agencies

may end up following rather than leading over the coming years. There is no doubt the

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 advertising industry is confronting new challenges, but change is a constant in this field.

Advertising is about creating change.

Likewise, there is no doubt that American businesses will continue to require advertising to

maintain competitive growth. In one form or another, it will continue to be an essential part of

selling a product, service, or idea. For however much it is criticized, advertising is as vital to

consumers as it is to business.

REFERENCES AND FURTHER READING

Arens, William F. Contemporary Advertising. 7th ed. Boston: Irwin McGraw-Hill, 1999.

Croteau, David and William Hoynes. The Business of Media: Corporate Media and the Public
Interest, 2nd edition. Thousand Oaks, CA: Pine Forge Press, 2006.

O’Guinn, Thomas C., Chris Allen, and Richard Semenik. Advertising. Cincinnati: South-Western
College Publishing, 1998.

Richards, Jef I., and Catharine M. Curran. Oracles on “Advertising”: Searching for a Definition.
Journal of Advertising, 2002, 31(2), 63-77.

Vivian, John. The Media of Mass Communication, 9th edition. Boston, MA: Pearson / Allyn and
Bacon, 2007.

Wells, William, John Burnett, and Sandra Moriarty. Advertising Principles & Practice. 6th ed.
Upper Saddle River: Prentice Hall, 2002.

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