Online Advertising is an evolving industry that strongly relies on survival of the fittest. Only those who adapt will succeed, and no medium has adapted quite as well as Internet advertising. Since its inception, digital advertising has grown exponentially. According to Business Insider, online video is currently growing at a more rapid pace than all other advertising formats and mediums, and there is no end to its growth in sight.
Since online advertising is such a staple of life in this digital age, it’s hard to remember a time when it didn’t exist. But the truth is, the foundation that today’s technology is based on is not nearly as sophisticated as its preliminary counterparts. In order to appreciate an industry this complex, it is important to know where all of its parts are derived from. Here is a very brief overview of the whirlwind that is the online advertising industry.
Surprisingly, the origin of online advertising dates all the way back to 1978 when Gary Thuerk, “the father of spam,” sent out the first spam email campaign. Thuerk, who was the marketing manager at the Digital Equipment Corporation, pulled a recipient list of 400 (un)lucky users from the Advanced Research Projects Agency Network (ARPAnet). His goal was to reach out to West Coast technological enthusiasts to invite them to a product demonstration of the new Decsystem-20 by Digital.
The next step forward for online advertising came in 1984 when Prodigy was invented. Prodigy was a user-friendly online service – the first to provide access to news, sports, email, bulletin boards, weather, and, most importantly, advertising, all in one place. It was the future of online activity, and it caught on like wildfire. Big names like IBM and Sears recognized the potential in Prodigy and backed the initiative. In exchange, their ads were displayed at the bottom of every Prodigy page. And, while these ads were unclickable, they provided a huge opportunity to reach millions of the service’s users.
Prodigy paved the way for online advertising to burst onto the scene. The first commercial website to sell clickable banner ads wasGlobal Network Navigator (GNN) in 1993. Similar to Prodigy, GNN was an online information portal that hosted a news service, online magazine, internet catalogue, marketplace, and forum. They sold their first banner ad space to the law firm Heller Ehrman White & McAuliffe, whose ad now had the clickable property to create instant traffic to the advertiser’s website. This new form of interactive online advertising created a high demand, and by 1995, advertisers were paying GNN big bucks per week for ad spots.
Hotwired was also a pioneer on the banner ad frontier. In 1994, Hotwired debuted as the first commercial web-based magazine. Like any print magazine, they had a large inventory of ad space to offer to big name companies. The advantage of the web magazine ads over print? Clickability.
Online Ad Servers
Online advertising had a strong foundation based on it’s new clickability and started to become widely popular amongst advertisers. The problem that now presented itself was a lack of organization and analysis. Questions began to arise. How would publishers get the word out that their site has available ad space? How would advertisers keep track of ROI on these ads?
These questions created the need for an online ad-server, a platform that would create a way to track ads and monitor consumer buying behavior. The first online ad server was DoubleClick. Developed in 1996 by Kevin O’Connor and Dwight Merriman, it was one of the first significant Application Service Providers (ASPs) available. It allowed advertisers the opportunity to choose from a wide variety of websites to advertise on, and provided the advertiser a chance to customize their ad campaigns dependent upon on their performance.
In order to appropriately charge for this kind of service, DoubleClick implemented the Cost per Thousand (CPM) model to charge for advertising. This model requires that advertisers pay a set price for every one thousand impressions their ad serves on one website, ensuring that they are paying for their ads to be seen, not just placed and overlooked.
Pop-Up and Pop Under Ads
In 1997, GeoCities’ Information Architect and Technical Project Manager, John Shiple, was faced with the challenge of finding a way to make advertisements more effective and more unmissable than traditional banner ads. His solution: pop-up ads that open a new window when a user tries to access a website, making them nearly impossible to ignore.
While these ads may be more effective, most internet users find them annoying and intrusive. In order to keep the same concept of an unmissable ad that is less in-your-face, a website network called ExitExchange developed the pop-under advertisement. Pop-under ads are essentially the same concept as pop-up advertisement, only these ads open behind the window you originally had open as to not disturb your web surfing.
PPM, PPC and CTR
With the recent influx of new websites being created, there was an increasing need for search engines to sort through the chaos. A year after pop-up and pop-under ads were created, Bill Gross of Goto.com came up with the paid placement model (PPM) for online advertising on search engines. This created a way for advertisers to buy higher profile spots in general searches.
GoTo.com experienced a great success from this model and was eventually acquired by Yahoo. Yahoo then offered the pay per click advertising model, which required advertisers to pay for clicks rather than placements. Every time an ad was clicked, the advertiser would pay Yahoo the rate for the click.
Meanwhile, Google was looking for a way to monetize its search engine services. It already had Google AdWords in place, which consists of a short text ad that includes a title line, two short descriptive lines, and a URL link to a website or a specific website page. However, Google sought a way to adapt and perfect the PPC model to place ads based on their relevancy. They developed the click through rate feature so that if an ad with a lower bid got more clicks than the others above it, it would climb up the ranking ladder, creating a better user experience.
Social Media Advertising
The rise of social media took the advertising industry by storm. Facebook has been a large player in this initiative. In 2006, Facebook signed on to a marketing promotion with J.P. Morgan Chase, as well as an advertising contract with Microsoft to provide banner ads and sponsored links on Facebook. Then, in 2008, Facebook launched “Facebook ads for businesses” and established their own ad platform, Beacon. The focus of these new advertising initiatives is arguably the social media advertising differentiator: viral brand messaging.
Twitter has also taken on the advertising game full force, harnessing their platforms’ viral nature. In 2010, Twitter introduced promoted trends and promoted tweets, allowing advertisers to pay for their company’s placement on the side bars.
One of the most powerful online advertising social media platforms, however, is YouTube. YouTube has been around since 2005, but it’s real impact on the advertising industry came in 2008 when they launched promoted videos and pre-roll ads. Pre-roll ads are those that play before the viewer’s desired content. These ads are too short to click away from, usually 15 to 30 seconds in length, making them highly impactful to viewers.
Targeting and Retargeting
The number of people who are engaging with online video advertising is on the rise. With this advanced medium, you can target a specific audience with 15-30 second ads that are less likely to be skipped, ensuring that the advertising dollars that were spent on commercials that didn’t reach your target market will have gone to waste. But how do online advertisers chose such a select group of consumers?
With online advertising, you can pull from third party data providers to target specific demographics of people, or even households down to latitude and longitude. Third party data is the information that can be collected about website visitors that can then be used to create detailed profiles, or segments, that differentiate users’ tastes and behaviors as they navigate around the Internet. By utilizing third party data segmentation, you can funnel your audience from the entire country to neighborhoods and communities.
You can also retarget the potential customers who have already visited your website by placing a pixel on your site that will cookie your visitors and allow you to follow them around the internet. By keeping track of who these unique visitors are, advertisers can follow their trail through the web in order to place their ads on other premium sites and bring them back to your site from anywhere on the web by retargeting your video advertisement.
Real Time Bidding
Today, it is easier than ever for advertisers to buy ad space online. By using a demand side platform (DSP), website publishers can send a bid request with their visitors’ demographics to all relevant advertisers on the Real Time Bidding (RTB) Exchange. Developed by Jason Knapp, the RTB Exchange similar to the stock exchange, only for ad placements on websites. The bidding process happens in milliseconds, making for a competitive industry with the capabilities to serve advertisers the impressions that they want, and for the publishers to receive the best rate for that impression.
According to Gestaltism, our brain maintains the ability to recognize whole forms rather than just a collection of simple lines and curves. However, the whole is not always greater than the sum of its parts. All of these lines and curves, from Thuerk’s first spam mail to Knapp’s RTB Exchange, have played a role in the development and progression of the form we now know as the online advertising industry. The question now is, what’s next?
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