Although online advertising has only existed for a short couple of decades, its growth has been exponential, and its presence has had a most significant effect on both the corporate world and its extensive commercial audience. While the industry attracts both admirers and critics, its general success and pervasiveness are undeniable. The following article will explore the captivating history of online advertising by discussing its many forms, analyzing its advantages and disadvantages. It will then justify its overall efficacy with specific case studies, particularly the model achievements of Google.
What is Online Advertising?
Before getting started, it is perhaps best to first define “online advertising,” for it is a broad term that takes on a variety of meanings and forms. Generally, when one mentions online advertising, one refers to the promotion of a good or service via the Internet and World Wide Web. However, one could specifically mean a variety of things, for there are several different types of online advertisements, many with unique characteristics and goals.
Visually, the most basic kinds of advertisements are text, display, and rich media. One of the most popular kinds of text advertisements is the e-mail ad. The first e-mail ad was created in 1978 by Gary Thuerk of the Digital Equipment Corporation, and was sent via ARPANET to announce a new DEC computer system. Although it was not intended to be an advertisement, per se, it marked the beginning of commercial spam, which in turn has begot the legitimate form of e-mail advertisement in which companies send messages to customers in an effort to build customer loyalty and expand their consumer base. Other simple text ads appear as links within the written content of a website. One of the first display ads was released in 1994 by AT&T and was published on Hotwired.com in the form of a banner ad. That same year Club Med, Volvo, and MCI created banners for Hotwired as well, marking the beginning of the banner ad boom. After the introduction of the banner ad, a multitude of new display ads took form. Some examples are: pop-up/under ads, which are displayed in a new window in front of or behind the current one being viewed; floating ads, which move across the computer screen; and wallpaper ads, which transform the background of a site into ad space. Rich media ads, which can shrink/expand, include high quality video, images, text, or other interactive aspects are the newest form of online advertisements. Their popularity is growing quickly for their appearances and interactivity are evolving each day.
These categories can be further divided into the following groups based on the specific type of site on which they are displayed: search engine, social media, mobile, and classifieds. Search engine ads (which will be discussed in greater depth towards the end of this article) allow businesses to pay for greater visibility or higher ranking on search engine sites; they are text ads, and one of the most popular fiscal models is pay-per-click, which requires advertisers to pay the site owner each time their advertisement is clicked. Social media ads which allow advertisers to create Facebook or Twitter pages with which customers can interact increase awareness and in theory expand their customer base by allowing people to rate, “like,” “friend,” or “follow” their business. Mobile ads take a variety of forms, but are usually some sort of graphic display ad; like social media ads, they are a relatively new form of promotion but continue to rapidly grow. Classified ads, much like those traditionally found in newspapers, became particularly popular after the launch of Craigslist in 1995. This format allows advertisers to promote and sell just about any kind of product, from housing, to jobs, to résumés, personals, and more traditional items.
What is Online Advertising?
Before getting started, it is perhaps best to first define “online advertising,” for it is a broad term that takes on a variety of meanings and forms. Generally, when one mentions online advertising, one refers to the promotion of a good or service via the Internet and World Wide Web. However, one could specifically mean a variety of things, for there are several different types of online advertisements, many with unique characteristics and goals.
Visually, the most basic kinds of advertisements are text, display, and rich media. One of the most popular kinds of text advertisements is the e-mail ad. The first e-mail ad was created in 1978 by Gary Thuerk of the Digital Equipment Corporation, and was sent via ARPANET to announce a new DEC computer system. Although it was not intended to be an advertisement, per se, it marked the beginning of commercial spam, which in turn has begot the legitimate form of e-mail advertisement in which companies send messages to customers in an effort to build customer loyalty and expand their consumer base. Other simple text ads appear as links within the written content of a website. One of the first display ads was released in 1994 by AT&T and was published on Hotwired.com in the form of a banner ad. That same year Club Med, Volvo, and MCI created banners for Hotwired as well, marking the beginning of the banner ad boom. After the introduction of the banner ad, a multitude of new display ads took form. Some examples are: pop-up/under ads, which are displayed in a new window in front of or behind the current one being viewed; floating ads, which move across the computer screen; and wallpaper ads, which transform the background of a site into ad space. Rich media ads, which can shrink/expand, include high quality video, images, text, or other interactive aspects are the newest form of online advertisements. Their popularity is growing quickly for their appearances and interactivity are evolving each day.
These categories can be further divided into the following groups based on the specific type of site on which they are displayed: search engine, social media, mobile, and classifieds. Search engine ads (which will be discussed in greater depth towards the end of this article) allow businesses to pay for greater visibility or higher ranking on search engine sites; they are text ads, and one of the most popular fiscal models is pay-per-click, which requires advertisers to pay the site owner each time their advertisement is clicked. Social media ads which allow advertisers to create Facebook or Twitter pages with which customers can interact increase awareness and in theory expand their customer base by allowing people to rate, “like,” “friend,” or “follow” their business. Mobile ads take a variety of forms, but are usually some sort of graphic display ad; like social media ads, they are a relatively new form of promotion but continue to rapidly grow. Classified ads, much like those traditionally found in newspapers, became particularly popular after the launch of Craigslist in 1995. This format allows advertisers to promote and sell just about any kind of product, from housing, to jobs, to résumés, personals, and more traditional items.
Given the aforementioned definition of online advertising, it is perhaps best to now analyze its general efficacy; with particular emphasis on its advantages over traditional advertising methods.
The Online Advantage
While all advertising mediums have their advantages and disadvantages, the online advertisement industry has some truly unique benefits that are especially advantageous in today’s dynamic marketplace because people are increasingly spending more and more time on the Internet. The success may not be evenly distributed among the many different types of online advertisements, but in general online advertising has become a billion dollar industry that continues to rapidly grow.
One of the biggest advantages of online advertising is its accessibility; advertisers can easily and instantly introduce their products to billions of people around the globe, and their advertisements are accessible to customers every day, (essentially) all of the time. Additionally, many types of online advertisements are easily modified; this is particularly helpful if a company notices its current ad has a low response rate because they can simply adjust their ad’s display and try again. Another advantage is that online advertisements are extremely targeted; and likewise, the programs used to market a specific audience, like AdWords and AdSense by Google, are relatively inexpensive in comparison to methods used by newspaper companies and other advertising mediums. Possibly the greatest advantage of online advertising is its efficient and effective ability to track the success of an ad. For example, it is simple for a company to measure the number of people who view their ad, the number of times their ad is clicked, or the number of times a person views their ad and continues on to view the company’s website. This kind of tracking is incredibly difficult to achieve, if not impossible, with any kind of advertising other than online.
The economic advantages of online advertisement vary substantially among the different types of web advertisements available. However, there are a couple of benefits that they all share. Firstly, the overall cost of an online advertisement is likely to be less expensive than that of alternative print mediums which often require printing and reprinting, distribution and redistribution, and can have expensive start-up costs. Secondly, the sophisticated tracking methods mentioned above allow advertisers to more easily measure the efficacy of their advertisements, can keep them from investing further into an unsuccessful ad, and thus save them money.
One of the most profitable online advertising companies is Google. It has not only earned billions of dollars in revenue by selling its advertising space and programs, but has set the standard for all online companies that wish to create successful and lucrative promotional campaigns.
Google: A Model of Success
In the late 1990s the banner ad boom was in full swing, and online companies were investing (and planning to invest) vast sums of money into online promotional campaigns. However, when the online advertising bubble burst in the spring of 2000, the online market, in particular the banner market, took a substantial hit. With advertisers’ faith in online investment now wavering, the future of online advertising was uncertain.
However, the market crash did not have a significant effect on search-based websites, particularly Google. This is because rather than investing in banner ads during the boom, Google had been focusing on text-ads that were based on search engine results and placed above or adjacent to them. This advertising method proved to be hugely profitable and propelled Google to become one of the most profitable, if not the most profitable online adverting company in the world.
Although Google adopted some of its techniques from other search-engine companies, the key to its success was relevance, which made the ads promoted on Google immensely profitable. The program introduced by Google in 2000 was called AdWords and used a self-serve pay-per-click standard. While it was lucrative, it was reshaped in 2002 to model a program created by Overture which used an auction-based pay-per-click model. While the new framework for AdWords was more or less borrowed, the quality that set Google apart from Overture and all other competition at the time was its sophisticated ranking algorithm. The algorithm assured that sites could not simply bid their way to the top of Google’s search pages, but had to be relevant to the search terms (had to have high click-response rates) in order to be highly ranked.
The graph below proves that Google’s model has been incredibly profitable. Its profitability, in turn, has also set a higher standard for all other advertising companies. While some seek to be more like Google, others simply wish to beat it out. For example, in November 2011 Microsoft, Yahoo, and AOL announced that they are going to form a partnership to sell online advertisement. They believe that by joining forces they can outsell both Google and Facebook. With such high profits and stimulating competition generated by the search-engine industry, it seems that search-engine advertisements will keep the online advertising industry alive for many years to come.
Sources:
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http://email.about.com/od/emailtrivia/f/first_spam.htm
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http://www.cctadvertising.com/beyond-banners/
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http://www.adweek.com/adfreak/looking-back-first-banner-ad-maybe-19834
Images:
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http://editorial.designtaxi.com/news-golden1811/2.png
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http://searchenginewatch.com/article/2112920/Search-Advertising-Revenues-Hit-7.3-Billion-in-First-Half-of-2011-Report
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http://www.onlinemarketing-trends.com/2011/01/online-marketing-evolution-infographic.html
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http://www.1stwebdesigner.com/design/online-advertising-history/
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http://googinvestor.blogspot.com/2011/10/google-reports-record-earnings-charts.html
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http://www.marketingcharts.com/interactive/online-ad-revenue-yahoo-yearns-as-google-grows-1013/emarketer-us-online-ad-revenue-share-google-yahoojpg/
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http://articles.businessinsider.com/2011-09-08/tech/30154897_1_facebook-yahoo-twitter
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http://searchenginewatch.com/article/2112920/Search-Advertising-Revenues-Hit-7.3-Billion-in-First-Half-of-2011-Report
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