Friday, December 9, 2011

How Technology has Changed the Advertising Industry

How Technology has Changed the Advertising Industry

Technology and the Internet have revolutionized all aspects of the advertising industry.  An advertising model that stood for more than half a century is being replaced by one that fits today’s technology-dominated global marketplace.  Advertisers and advertising agencies are in the process of restructuring their businesses based on this and the newfound power of the consumer.  Individuals with technical backgrounds are taking the lead in the industry, which has important implications for educators.


traditional advertising, online advertising, ad agencies, marketing, marketing education, Internet technology, social media, mashup, digital technology


Technology has changed the dynamics of the business world; and in the advertising industry, specifically, necessitated a move from “old” marketing techniques to “new” marketing techniques.  The number one fastest growing advertising channel is the Internet
(“Internet Trends,” 2010).  With the emerging technologies such as mobile and the impact of social media platforms, it is far more effective for advertisers to utilize the web and market to consumers in the format that is easiest for them.  People are no longer watching television when it airs; they are no longer listening to traditional radio; and they are no longer surfing the web only at home.  The audience is no longer an audience; consumers control the conversation and they choose which advertisers may speak to them.

Advertisers must adapt and modify their content to the way that the audience is consuming.  The young people in “Generation Y,” “echoboomers,” and “millennials” are increasingly immune to the clichés of prime-time television and radio, and they mentally tune out these nuisances.  Online, however, they may accept advertising if it is unobtrusive, relevant, and fun.  Insofar as they took some action to invite the advertisement, they may even find it useful.  As Glenn Beck, conservative commentator and media entrepreneur, recently cautioned both content providers and advertisers at the 2011 Advertising Age Media Evolved Conference in New York:

“I don’t know anybody under 30 who is watching television.  My kids don’t watch television. . . .  The problem is that we are at a split right now.  The generation that is slightly over 50—they’re not using iPad.  They don’t get it.  They don’t want it.  The younger generation, that’s [television] not their comfort zone; it’s a stupid box that you’re tied to.”  (Beck 2011)  


With the advent of television, the practice of modern advertising has been virtually unchanged for half a century.  In the 1950s, advertising and television programming were connected through sponsorships.   Programs such as the Firestone Hour and the General Electric Theatre were owned by advertisers, and the shows’ content was based on the interests of the audiences they wished to reach.  Selling smaller blocks of television advertising time to multiple sponsors of programs began in the latter 1950s and continues today.  This practice is the standard for the commercial television industry in the United States.  Television continues to be the largest source of profits for advertising agencies. 

As the 1960s saw society embrace idealistic views and consumerism, advertisements became focused on engendering an emotional connection to a product rather than a message simply extolling a product’s virtues.   The importance of television in shaping consumer perceptions was exemplified in the September, 1960, debate between Senator John Kennedy and Vice President Nixon in the first-ever televised presidential debate.  Nixon, recovering from a hospital stay, arrived at the debate in a poorly fitting shirt and refused makeup to improve his sickly pallor and five o’clock shadow.   In contrast, Kennedy was tan, neatly dressed, and well rested.  What the 70 million television viewers saw was an unkempt, pale Nixon who was obviously discomforted by Kennedy’s smooth style and charisma.   Follow-up audience studies indicated that those who watched the debate perceived Kennedy to be the winner by a very large margin, whereas those who listened to the debate on radio pronounced Nixon the winner.  In fact, political analysts found the candidates to be evenly matched on substance (McGinniss, 1969).

Advertising agencies gained insights into human nature from the debates and found that pairing copywriters trying to find the right words to “pitch” a product with creative directors/artists trying to come up with the right picture could spark “genius.”  This simple move by Bill Bernbach, founder of DDB (Doyle Dane Bernbach), sparked the advertising industry’s creative revolution, changing the practice of advertising from the science of salesmanship with overblown promises to an art form of emotional persuasion (Kassaei, 2011).  For example, in the 1960s a DDB copywriter and psychologist Ernest Dichter came up with the tiger as a symbol for Esso gasoline after determining that motorists desired both power and play while driving.  A brand awareness campaign was built around the simple theme of “Put a tiger in your tank,” and Esso spent hundreds of millions of dollars in different mass media channels worldwide.  This campaign and DDB’s Volkswagen Beetle campaign, which Advertising Age named the best of the 20th century, marked the beginning of the change in how ads were created.

Business advertising fell into a predictable model:  production of ads with emotional appeals followed an assembly-line approach to creativity until the 21st century (Belch & Belch, 2001).  The path went from the client to the agency’s account executive, who briefed the brand planner (whose research using focus groups uncovered the big consumer insight), who briefed the media strategist who decided which channel to use.  Then the copywriter/art director team would pass on its representation of the big idea in the form of storyboards for a 30-second television commercial to the producer who worked with a director and editors to film the commercial.  The media buyer would then negotiate the price of television and radio spots along with the price of print pages to be used in deciding what combination of mass media to utilize to present the “big idea.”  For decades, television was the medium of choice to speak to an audience.  It not only reached a mass audience but was also the most expensive medium, which brought in the most money for an ad agency.


The creative process shifted when IBM and Apple introduced the first affordable computers with monochrome screens, hard drives, and unbelievably slow microprocessors.  Although the companies proved that a computer could be an affordable and practical office accessory, creative types stuck to their typewriters and storyboards until Apple produced the Macintosh in 1984.  It happened during the January 22 NFL Super Bowl with a 60-second commercial in which a young women throws a hammer at a big screen image of Big Brother from George Orwell’s 1984.  As one industry expert later put it, “The commercial changed advertising; the product changed the ad business; the technology changed the world” (Johnson, 1994).  While the original Macintosh was very basic, it gave creative professionals a new way of viewing computers.  Visual thinking was the key, with friendly on-screen icons like folders and trashcans and a mouse to move the cursor around the screen.

Technology changed the advertising business this time by making creativity possible for everyone.  With the introduction of PageMaker graphic design software and Apple’s laser printer, ad agencies could produce quality work on the desktop.  Not only could individuals work more creatively, but the way they worked at creating was different.  Writing and editing were no longer a two-stage process with one final, hard-to-change manuscript as the end result.  With the help of computers, writing of copy could begin at any point and changes to “final copies” could be made at any time.  The same became true for graphic designers who previously had to create visuals and storyboards by hand and whose photographs could not be visualized accurately until the printing proofs were in.  A graphic designer no longer had to be an artist with a sketchbook and paintbrush.  The fixed progression from thumbnail sketches to full layouts gave way to a constantly-evolving onscreen design.  A printout of a design becomes just a copy of a growing “ideal” design inside the computer that never reaches a final stage and is always open for improvement.  Today, creating advertising is more free-flowing than it ever was with a typewriter and a paintbrush.

World Wide Web and the Internet

Advertising began another transformation with the introduction of the World Wide Web and the development of a search engine as a way to look for sites on the Internet in the 1990s.  In 1994, the World Wide Web was not yet a household name.  A new company called Yahoo! had just developed a search engine, and HotWired debuted as the first online magazine to carry advertisements.  When the site published the first banner ads (static, billboard-shaped notices) in 1994, about 10 percent of those who saw the ads were enticed to click on them.  These surfers were taken to the sponsor’s Web site, and a new age in advertising had begun.

1995 – 2000
The beginning of online advertising was marked by experimentation and pioneering by advertisers, publisher, and ad serving technologies, both in term of ad formats and ad delivery.  In 1995, large corporations and brands such as AT&T, Saturn, Time and Proctor & Gamble began investing in both their own websites and in online advertising.   In 1996, the first major change to online advertising came when Hewlett-Packard embedded Pong (the first video arcade game) into a banner ad, creating one of the first interactive ads on the Internet.  By 1997, the Web had gained broad commercial acceptance as a sales medium, and businesses flocked to the Web to create e-commerce sites, content sites (usually online versions or newspapers or magazines), and to offer advertising space. 

As advertising began to saturate the Web, marketers tried new tactics to gain attention.  By the end of 1997, pop-up and pop-under ads became common, and U.S. advertisers spent $940 million on online advertising for the year.  By 1999, businesses were fighting for “face time” with customers on the exploding Internet, and online spending reached nearly $1 billion in the second quarter, contributing to the “dot-com” boom of the 1990s.  The most important contribution of the boom period from 1999 – 2000 was the development of many technologies to target and deliver ads.

2000 – 2002
From the beginning, advertisers, agencies, and publishers realized that advertising online was very different from utilizing traditional media.  In no other media channel could advertisements be targeted and measured the way they could be online.  However, the medium was misunderstood for a long period.  Traditional advertisers in such key industries as automobiles, consumer packaged goods, and financial services were wary of the click-to-buy phenomenon.  They watched as the dot com boom drove pricing of unproven, online ads to irrational levels, preferring to advertise in the more traditional media which utilized rational pricing and standards.  Then, during the uncertain economic times of 2000-2002, online advertising dollars dried up, and spending for online ads declined 32 percent.  Large advertising agencies were not interested in supporting an unproven media channel, and both traditional advertisers and agencies would wait on the sidelines until the effectiveness of the medium was proven many years later.

During this time period, Internet advertising was in rapid decline with the exception of “search,” which was just beginning to show high levels of efficiency.  Because of its measurability and high ROI, the U. S. search market grew from $475 million in 2001 to $2.3 billion in 2003.  Agencies and advertisers increasingly realized the value of online brand advertising, especially for hard-to-reach demographics such as working adults and teens.  In addition, more traditional advertisers, such as consumer packaged goods companies, began adopting online advertising and are still driving the growth of display advertising today.  By 2004, the online advertising industry had recovered, and agencies reluctantly accepted their role in supporting the increased online inventories of Yahoo, MSN, AOL, and the smaller sites and networks.  It had become clear that online advertising was effective and here to stay.

Since 2004, there has been a rapid adoption of the online medium by advertisers as a branding mechanism and a vehicle to successfully launch new products.  Similarly, there has been an increasing use of the Web by agencies as part of an overall marketing campaign or even as the central focus of a campaign.  Additionally, search has become an important marketing tool and now roughly equals display ad spending.  Finally, with the increase in broadband adoption starting in mid-2005, advertisers began adopting streaming-video ads, and they have become the prevalent form of display advertising today.  Video advertising is now growing faster than all other online ad formats (“Online Advertising,” 2011).

Content creation
Significantly, Internet users have started to take more control of content creation, becoming active participants in creating content as opposed to simply passively reading content.  The concept of crowdsourcing has given way to the trend of user-generated advertisements.   User-generated ads are created by consumers as opposed to an advertising agency or the companies themselves.  Most often, they are a result of brand-sponsored advertising competitions such as Frito-Lay’s “Crash the Super Bowl” contest begun in 2007 for a Doritos commercial.  In other words, the consumer used to be the one in the picture; now he is the one creating the picture.

Social media
The advent of social media in combination with the interactive capabilities of smartphones has rewritten the book on advertising.  With the enormous increase in the popularity of social media platforms such as YouTube, Facebook, MySpace, blogs, and Twitter, millions of potential consumers form a ready audience for advertisers (Schmidt, 2010).  Not only can target demographic groups be easily located (geo-targeting,) but the cost factors are quite economical when compared with costs for traditional advertising.  Marketing through a conversation remains novel:  establishing a strong social media presence in a “community” is quite different from shooting commercials and buying air time or spending money taking out ads.  Doing so takes significant amounts of effort and diligence, but companies today that are communicating directly with their customers and taking the time to build relationships will stay competitive and survive in an ever-changing marketplace.

 Implications for Marketing Education

Although the advertising industry has changed dramatically, most college programs in marketing  continue to offer a classical marketing curriculum.  Many have simply added an additional  elective or two on digital or interactive marketing and on international marketing instead of redesigning the requirements and courses necessary to obtain a marketing degree.  In many college programs for marketing majors, the focus is often on the manufacturing business with some emphasis on global markets instead of on the advancement of marketing in the Internet and technology spectrum.

Marketing courses typically offered at colleges, for example, currently include the following:

  • Principles of Marketing                      
  • Consumer Behavior               
  • Marketing Research
  • Business Marketing                            
  • Personal Selling                      
  • Marketing Management and Strategy
  • International Marketing                     
  • Promotional Strategy             
  • Marketing Channels
  • Selected Topics in Marketing            
  • Electronic Marketing

This curriculum could be supplemented with courses such as a Communications class for online press releases and advertising communications, a Graphic Design class and a Website Programming class for marketing majors, an HTML editing class, and a course on online Pricing Strategies and their relationship to financial analysis.

In today’s world of online advertising, “techies” and computer gurus are leading the way, not classically trained marketers.  Just as digital technology decimated the newspaper industry and radically changed the business model for the music, book, television, and film industries, the assembly line of the ad production process has been obliterated.  Managing advertising in the realm of the Internet requires a new set of skills.  Strategic thinking and a grasp of the creative side have always been important in advertising, but now an understanding of the complex, technology-related issues has added a new element to the skill set mix.  Technical knowledge is an essential requirement in building e-commerce models.

Companies will hire individuals with marketing degrees and experience but those people also have to have technical skills.  Students at technical schools are taught computer skills, whereas those receiving a university marketing education are taught theories and processes of advertising and marketing.  Trade school students learn how to program websites while simultaneously acquiring artistic, photographic, and videographic skills.  Courses such as these are not offered in traditional marketing degree plans.  In the past, those educated at trade schools were hired to fill technical positions in the advertising and marketing fields, while classically-trained marketers  would rise to leadership positions that included overseeing a technical staff.  In the fast-paced digital world of the 21st century, technically-educated students are now ascending the ranks, and experienced marketers are rapidly becoming dinosaurs.  As one advertising executive admitted at a recent re-training class taught by a school producing the most coveted digital talent in the ad industry:

“I left my cushy job at a global agency.  Actually, I didn’t leave; I was pushed out. . . .
I feel like the digital world is a gated world.  It’s wide open, but I don’t even know enough to walk in.”  (Goodson, 2010)

The need for technical expertise is sending ripples of change throughout the advertising industry.  People who were not initially attracted to advertising, such as MBAs and computer science majors, are entering the field.  Some of the larger agencies have initiated training and management development programs to recruit talented young people who might otherwise be tempted to enter another field requiring their technical expertise.  Agencies are also bringing in people from the outside to lead digitally.  For example, the Creative Director, a senior level position in an ad agency’s organizational structure, used to be the person with the most experience and creativeness.  Today, this person is more likely to be the one with the most technical skills, the least advertising experience, and an undeveloped sense of creativity.  Even the physical office space of the new-age advertising agencies is being rearranged:  no longer are people isolated in offices and by long hallways where different disciplines never cross paths.  In the new digital agencies, social-media people, creatives, media planners, technologists, and user-experienced individuals are seated next to one another at modular desks.  One progressive-thinking CCO (Chief Creative Officer) went so far as to change his title to that of Chief Social-Media officer!

Overall, both the advertising industry and the educational system have utilized a functional view of marketing’s processes and procedures and have operated or taught accordingly.  Perhaps because of a combination of disintermediation by the Internet, economic considerations, and corporate blindness, many have not identified the emerging trend of integration of all disciplines in the marketing process.  For example, traditional advertising media include print, radio, and television.  Marketing educators continue to teach the advantages/disadvantages, appropriateness, and the most effective strategies for the use of each platform.  Traditional advertising agencies have separate print and broadcast (radio and television) divisions, and to these companies, an “integrated marketing plan” often means simply using both divisions.  In line with a functional view, the Internet and online advertising now constitute the fourth media channel or platform.

Today, the realm of digital has changed the entire landscape of advertising.  An online digital platform is not just another advertising channel to be added to the traditional three (print, radio, and television).  It is a “mashup,” a blending of all channels that requires a heavy emphasis on technical skills and that should be taught as such.  This mashup of channels and the evolution of computer technology have made those individuals who can maneuver quickly to produce ads and campaigns the most valuable players.  Real time response is the future of marketing.  Those who use blended media and the latest technological tools to produce the fastest and easiest to view/read/or listen to communications will lead the industry.  Consumers today have a complex relationship with media, and the new challenge is how and where to engage with them.


Advertising is a new world defined by technology and consumer control.  With 2 billion users and potential consumers currently on the Internet, traditional advertising models are no longer viable.  The new advertising models are based on Internet technologies and innovation that encourage consumers to take the initiative and interact with what they find online.  The challenge to marketers is to unlearn the business of messages and story telling and to master the art of conversation and community.  With the U.S. online advertising market projecting that spending will exceed $31 billion in 2011, a 14.9 percent increase from 2009 (“Online Advertising,” 2011), Glenn Beck has aptly called the times “one of the most exciting [in media] since the printing press.”

Copyright 2011 James L. Alyea. All Rights Reserved.


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About Jimmy Alyea:
Jimmy Alyea lives in Houston, Texas, and holds two Bachelor of Business Administration degrees (Supply Chain Management and Marketing) and a Master of Business Administration degree.  Follow Jimmy Alyea (James Alyea) on LinkedIn, Twitter, or Blog.