Back to Basics: The History of Digital Advertising

The journey of online advertising is a captivating narrative of ingenuity and evolution. During the early days of the Internet, online advertising had limited itself to basic banner ads and emails, which produced modest results. However, with the growing ubiquity of the internet in people’s daily lives, businesses began to recognize its potential as a potent marketing tool.

Online advertising has undergone a profound metamorphosis, reshaping the advertising landscape by reallocating budgets from traditional media to digital platforms. This transformation empowers advertisers to precisely target their audience and deliver personalized messages, enhancing the efficacy of their campaigns while maintaining a cost-effective approach.

The wealth of data generated in this digital realm empowers advertisers to fine-tune their strategies and create more captivating content. Global brand visibility and awareness have experienced a meteoric rise, driven mainly by the ascent of mobile advertising and the influential impact of influencer marketing. This dynamic industry fosters healthy competition and fuels a culture of innovation, benefiting advertisers and consumers.

Reflecting on the history of online advertising, it becomes evident that it has traversed a remarkable path from its modest origins. Today, online advertising is an indispensable element within the marketing arsenal for companies of all sizes, and its momentum shows no sign of waning. The future of online advertising promises to deliver even more exhilarating developments and pioneering innovations.

The Banner Age (1994-1998)

In the early days of online advertising, AT&T launched the first banner ad on Hotwired magazine, running for three months for $30,000 and achieving an impressive 44% click-through rate. This success led to widespread online display ads as advertisers sought more targeted approaches based on consumer demographics.

Recognizing the unique cost-effectiveness of email-based messaging, advertisers flocked to the internet, attracting a wave of investments from entrepreneurs, investors, and advertisers eager to capitalize on this lucrative opportunity.

WebConnect, the pioneering ad agency, revolutionized digital advertising by partnering with clients to pinpoint their ideal consumers’ preferred websites. This strategic placement ensured that ads reached the most relevant audience. WebConnect introduced a tool to combat ad fatigue, addressing a common issue where users repeatedly encounter the same ad. These innovations marked a significant shift in the digital advertising landscape.

In 1995, Yahoo emerged as the leading search engine, charging up to $100 for banner ad placements. Advertisers adhered to the 468 x 60px banner ad format, solidifying its role in the early landscape of online advertising.

In 1996, the ad server era began with DoubleClick’s launch, a concept by Kevin O’Connor and Wight Merriman. DoubleClick pioneered ROI tools for ad campaigns, allowing businesses to measure their advertising effectiveness. This innovation also led to the adoption of the CPM pricing model by significant players like Netscape and Infoseek.

Founded in 1996, the Interactive Advertising Bureau (IAB) became a pivotal catalyst for the online advertising industry. This organization established industry standards, conducted vital research, and provided crucial legal support, marking a significant stride toward a more organized and efficient digital advertising field.

In 1997, Tripod’s Ethan Zuckerman pioneered pop-up ads to combat ad-blindness, but they quickly earned a reputation for being intrusive and annoying. This led to the development and widespread adoption of pop-up ad blockers, diminishing their effectiveness in online advertising.

The need for effective navigation became apparent as the web rapidly expanded with a growing number of websites. This led to promoting search engines, even though others like AltaVista, Lycos, and Infoseek already existed. In 1998, Google emerged as a game-changer in the digital advertising industry, a position it still holds today, setting the standard for online search and advertising.

At that time, declining click-through rates on display ads prompted advertisers to embrace paid search and pay-per-click advertising. Goto.com, an early player, revolutionized the industry with its keyword auction model. It is worth noting that it would later become Overture and merge into Yahoo.

1994 – First clickable web-ad banner

1994 – First e-commerce transaction over Netmarket

1994 – Develop the initial cookie specification

1995 – Launch of Yahoo

1996 – Adoption of CPM pricing model

1996 – Foundation of IAB

1997 – Rise of pop-up ads and ad block

1998 – Google release

1998 – Born of search advertising

1998 – Starting a way of search advertising

The Channel Age (1999-2002)

During this era of rapid web expansion, users needed a more efficient means to navigate the vast digital landscape. As search engines gained prominence, advertisers sought to craft more personalized and appealing ads, leading them to embrace sponsored search as the next frontier in digital advertising.

In 1999, GoTo.com pioneered the concept of pay-for-placement search engine services. This innovative approach allowed advertisers to bid for prime positions in search engine results based on specific keywords, marking a significant evolution in advertising.

The Dot Com Bubble reached its zenith in 2000, driven by substantial speculative investments in the industry. Inspired by the internet’s exponential growth, investors were eager to participate. Paid search engines like Yahoo set the stage for potent online advertising models.

In the same year, Google AdWords (future Google Ads) emerged to address the user experience issues plaguing paid search results. It aimed to create a sponsored search experience that upheld the quality and relevance of search results. Google’s enduring Quality Score model, which is still in use today, realized this goal.

Around mid-2000, the Dot Com bubble burst, leading to a significant downturn. The vast influx of money sustaining the online advertising bubble dwindled, causing a decline in the value of internet-based companies. The stock market collapse triggered a recession, resulting in sharp declines in stock prices and business closures.

1999 – Starting pay-for-placement search engine services

2000 – The Dot Com bubble booms

2000 – Birth of Google AdWords

2001 – First mobile marketing campaign by Universal Music

2002 – The first AdBlock extension for Firefox

2002 – Introducing cost-per-click (CPC) and pay-per-click (PPC) pricing models

The Social Age (2003-2008)

Following the burst, internet advertising declined, except for the search engine technology sector. The highly efficient search engine technology market thrived, reaching USD 2.3 billion in 2003.

Mark Zuckerberg and Harvard buddies launched Facebook, originally “TheFacebook.” In March, Zuckerberg mentioned ads to cover server costs in The Harvard Crimson. Within a month, ads for college student-focused companies appeared on the platform.

2005 YouTube, the world’s largest video advertising platform, launched. The following year, a new era of customer engagement began on social networks, offering the freedom to like, share, or rate information. Companies seized the opportunity to promote products on YouTube, a valued consumer platform for video, without significant investments.

In 2006, Facebook unveiled sponsored links and compact display ads tailored to user demographics and interests. Concurrently, Twitter, a significant advertising platform, was launched, introducing the concept of concise 140-character communication and popularizing hashtags.

The advent of the iPhone in 2007 marked a pivotal moment in mobile advertising. Social networks became vital avenues for connecting with potential and current customers, presenting numerous opportunities for engagement. Also this year, Facebook founder and CEO Mark Zuckerberg introduced Facebook Ads, empowering businesses to connect with users and tailor their advertising efforts. This was a significant event for digital advertising, marking a massive change in what people will call advertising in the future.

The following year, in 2008, Facebook introduced Engagement Ads, designed to captivate users’ attention by enabling them to comment on ads, share with friends, or become fans of the advertised businesses. Simultaneously, YouTube launched its inaugural pre-roll and promoted Video Ads.

2003 – Starting Google AdSense

2003 – The launch of LinkedIn

2004 – The launch of Facebook

2005 – The launch of YouTube

2006 – The launch of Twitter

2007 – Introduced Facebook Ads

2007 – iPhone released?

The Native Age (2009-2011)

Advertisers sought more discreet avenues to promote their products as the internet became saturated with companies vying for attention. This shift in strategy gave momentum to native advertising, which experienced a surge in popularity thanks to its superior click-through rates (CTR) and heightened engagement levels. The content aims to promote the business, but with native advertising, the format seamlessly blends in, resembling regular content on the host’s website rather than a disruptive ad. This approach shifts away from interrupting the target audience’s online experience, empowering marketers to create promotional content that enhances and complements the user’s online journey.

In 2010, Instagram debuted exclusively for iOS devices, quickly evolving into a prominent marketing and advertising platform. Soon after, Facebook acquired Instagram. The subsequent year saw the creation of Snapchat, introducing widespread video use with augmented-reality filters that captured the attention of millennials. Also, this year, Twitter introduced promoted tweets, allowing users to expand their reach and generate increased engagement from existing followers.

The allure of celebrities endorsing brands on Twitter became evident as businesses recognized the value of tapping into their massive followings. Sponsored Tweets gained significant traction, with celebrities like Charlie Sheen – Twitter’s first person to reach one million followers – contributing to its rise.

2009 – The launch of real-time search engine results

2009 – Implementing new real-time bidding (RTB) technology

2009 – The launch of WhatsApp

2010 – The launch of Instagram

2011 – The launch of Snapchat

The Modern Age (2012-2019)

In the past decade, we witnessed swift transformations in consumer behavior online, with one of the most notable shifts being society’s reliance on mobile phones. People start to spend extensive hours on their mobile devices, engaging in activities such as communication, photography, bill payments, and email checking. The widespread use of apps catering to various aspects of life has led to an escalating amount of time spent on smartphones.

The increasing prevalence of smartphones prompted advertisers to shift their focus to in-app mobile advertising, diverting attention from the mobile web browser. A notable example is the voice technology “Alexa,” enabling users to conduct voice searches.

In 2012, the Internet of Things (IoT) emerged, leaving its mark on marketing and advertising. In subsequent years, it brought intriguing developments, such as Instagram’s introduction of sponsored posts, enabling users to promote both old and new content.?

In 2014, the Interactive Advertising Bureau (IAB) unveiled the initial version of the OpenRTB protocol, a game-changer in online marketing advertising. This protocol enables programmatic advertising, using algorithms to place ads based on user data automatically. Its introduction marked a crucial advancement, streamlining the delivery of targeted and personalized ads to the right audience at the right time. The OpenRTB protocol has since played a key role in driving the growth of programmatic advertising in many companies’ online marketing strategies.

In 2014, we witnessed the debut of Pinterest, contributing to the continued expansion of social media advertising. 2015 AppNexus revolutionized the landscape by introducing the open-source header bidding platform Prebid.js. This innovation empowered publishers to integrate header bidding into their operations effortlessly. In 2016, the IAB made a significant announcement signaling a historic shift in advertising trends—mobile ad expenditure surpassed desktop for the first time.

In the transformative year of 2017, two noteworthy technological advancements unfolded. Firstly, IAB Tech introduced Ads.txts, a pioneering initiative to enhance transparency within the programmatic advertising ecosystem. Concurrently, the tech giants Apple and Google made waves in augmented reality. Apple unveiled the AR Kit, and Google followed suit with AR Core, paving the way for innovative mobile AR applications and advertising.

2012 – Release of Internet of Things (IoT)

2013 – Sponsored posts by Instagram

2014 – Release of OpenRTB protocol

2014 – The launch of Pinterest

2014 – Launch of Facebook messenger app

2014 – LinkedIn features tailored ads

2015 – AppNexus introduce Prebid.js

2015 – Rise of content marketing

2016 – Augmented-reality heyday

2017 – Release of Ads.txt

The Decentralized Age (2018-present)

Society underwent a significant shift as mobile phones became integral to daily life. People spent hours communicating, taking photos, making bill payments, and checking emails through many apps. The surge in messenger app usage, led by WhatsApp, Facebook Messenger, and WeChat, revolutionized personal and business interactions, enabling direct and personalized conversations with customers.

In 2018, the EU enforced the General Data Protection Regulation (GDPR), establishing a regulatory framework that imposed limitations and prerequisites for collecting and managing personal data.

In 2019, in the wake of an off-the-record investigation into the programmatic advertising industry’s handling of personal data through Real-Time Bidding (RTB), the Information Commissioner’s Office (ICO) released a comprehensive report addressed to adtech companies. This document meticulously details the expectations for data management following legal standards. As the ICO gears up to enforce compliance, the report serves as a pivotal guide for adtech entities, emphasizing the imperative for alignment with the law in the evolving data privacy landscape.

As we entered the early 2020s, the global pandemic acted as a catalyst, expediting the transition from traditional linear TV to connected TV (CTV) and over-the-top (OTT) platforms. This paradigm shift provided programmatic advertisers with a fresh medium as the delivery of digital advertisements became increasingly automated through sophisticated software systems.

In 2020, online advertising revolutionized with the widespread adoption of artificial intelligence and machine learning. These technologies enabled companies of all sizes to deliver highly relevant ads, maximizing the effectiveness of their campaigns. The continued expansion of AI and machine learning in online advertising is poised to bring further innovations and shape the industry’s future.

Digital advertisers benefit from extensive data points in the present landscape, empowering them to craft hyper-targeted and personalized advertisements. Nevertheless, the evolving landscape poses challenges, with new privacy laws and the impending deprecation of third-party cookies prompting a reevaluation of how advertisers navigate the intricacies of data utilization.

The decreasing importance of third-party data mirrors the broader trend of decentralization, where significant data companies will no longer have the capacity to aggregate and sell it as before. A shift towards a decentralized network, primarily comprised of first- and second-party data, is emerging as the new standard in digital advertising. In this environment, individuals and the businesses they entrust with their data are poised to become the primary controllers of that information.

From 2021 to 2022, blockchain-based games had an astounding 2000% surge, marking a remarkable shift. Web 3.0 is an ideal realm for programmatic advertising, devoid of real-world constraints. This era witnesses the evolution of technologies that enhance advertising tools, placements, and formats, recognizing the limitations of real-world effectiveness. The metaverse emerges as a groundbreaking approach, exemplified by developments in cookieless technologies for heightened anonymization. The utilization of open-source software accelerates the pace of innovation in advertising technologies. The advent of NFTs and crypto introduces novel ways to engage with ad viewers, ushering in a transformative era in advertising interaction.

2018 – Implementation of GDPR

2018 – Implementation of CCPA

2018 – Release of Google Ad Manager

2020 – The rise of CTV and OTT

2020 – The rise of AI technologies

2021 – The rapid growth of Web 3.0

2021 – Implementation of iOS 14’s app tracking transparency

2024 – End of cookie era

Summary

The history of digital advertising has undergone significant evolution, starting with the banner age in the mid-1990s, marked by the launch of the first banner ad by AT&T. The rise of search engine services like GoTo and the emergence of Google AdWords followed the channel age. The social age saw the birth of major social media platforms like Facebook and Twitter, shaping new avenues for advertising. The native age brought about a shift to native advertising for a more seamless user experience.

The modern age, spanning from 2012 to 2019, witnessed the dominance of mobile advertising, the emergence of the Internet of Things (IoT), and the rise of programmatic advertising with the OpenRTB protocol. Starting in 2018, the decentralized age introduced regulations like GDPR and CCPA, emphasizing data privacy. In advertising, artificial intelligence and machine learning became prominent in 2020, focusing on hyper-targeted and personalized campaigns. Since 2020, BidsCube has been making digital advertising accessible to everyone.

As the industry moves forward, the declining importance of third-party data and the impending end of the cookie era in 2024 are reshaping digital advertising. Blockchain-based games, the rise of Web 3.0, and the advent of the metaverse are influencing advertising tools and formats. NFTs and crypto are introducing novel ways to engage with ad viewers, ushering in a transformative era in advertising interaction.

A website version of the article: https://bidscube.com/blog/2023/11/23/how-can-programmatic-ecosystems-benefit-an-advertising-market/