Advertising industry history

American advertising is a huge and powerful industry with expenditures approaching $250 billion in 2001 in the United States alone, with more than $450 billion spent worldwide. The biggest advertisers are the nation’s manufacturers of automobiles, food, soft drinks, beer, and tobacco. Advertising expenditures pass through thousands of advertising agencies that primarily create the ads and buy the space or time in the media. Some agencies have formed global corporations with worldwide connections, while other, smaller agencies have chosen to specialize in retailing, direct mail, and minority markets, among other services.

European colonists brought the idea of advertising with them to America, but the concept was slow to take hold. Colonists had little need to advertise their goods and services for sale over a wide area. In 1704, the first known newspaper advertisement appeared in the Boston Newsletter, offering real estate for sale. During the 18th century, the Pennsylvania Gazette was the first newspaper to print advertisements with illustrations. And the first magazine advertisement appeared in the May 1741 issue of General Magazine.

The majority of advertising centered on land, runaways (slaves and indentured servants), and transportation. Notices selling slaves also constituted a good percentage of these advertisements. The remaining ads were lists of goods offered for sale by local merchants and descriptions of books newly published. These simple announcements basically answered the readers’ two questions—where and when? Advertising then changed dramatically.

The Industrial Revolution brought bigger and faster steam presses, lithography, new methods of paper-making, and color reproduction techniques that made volume printing cost-effective by the mid-1800s. At the same time, the country’s burgeoning urban population, booming economy, and western expansion created a demand for news about business, travel, entertainment, and the availability of goods and services. This led many newspaper publishers to consider advertising as a vital source of revenue; some even included the word “advertiser” in the paper’s name. The typical newspaper page looked much the same as our present-day want ads or legal announcements, with little white space and few illustrations to separate the ads.

A key development in the newspaper world was the introduction of the “penny paper,” which cost only 1 cent compared to the more common 5 or 6 cents. At this low price, the papers planned to sell a lot of advertising to subsidize revenue. The result was that newspapers sold enormous amounts of space in one-inch chunks. Unlike newspapers, magazines made most of their money from subscriptions and did not accept paid notices until the 1870s.

With improved methods of transportation, manufacturers distributed their goods over wider areas and thus required sales promotions that reached beyond their local region. Advertisers found that the media arrangements needed to print their announcements included a myriad of details and time-consuming tasks. These included identifying effective newspapers, negotiating rates, directing the printer, confirming the insertion, and sending in payment. To fill this need, newspapers began paying agents to sell space to advertisers and thereby gave birth to an entirely new business, the advertising agency. 

The first advertising agent in America was Volney B. Palmer, who started in Boston in 1841 and soon opened offices in New York and Philadelphia. Still, there were barely a half-dozen such agencies as late as 1865. By the last part of the century, however, the newly opened agencies began to offer their services to advertisers, promising help with writing the ads, seeing that they were placed in the best possible locations, and trying to get the best possible deal with the paper. Like today, the agency is typically paid a commission by the newspaper, magazine, or television company. The advertising agency collects the money for the bill from the advertiser, takes out a 15 percent commission, and passes what is left to the newspaper or magazine or media station.

Many did not consider advertising an honorable practice. Without any formal regulation, advertisements for dubious health remedies, getrich-quick schemes, and other outrageous fakery filled the pages of national newspapers and magazines. The ad copy, commonly called “puffing,” had no limit to the claims it made. This image was not helped much by advertising for patent medicines, which were the first products to heavily advertise on a national scale. However, the patent medicine companies, desperate for places to advertise, recognized that pages in magazines could efficiently promote their products.

Ads also provided a new source of income to magazine publishers. At this point, the role of the magazine publisher changed from being a seller of a product to being a gatherer of consumers. For example, Collier’s, Ladies’ Home Journal, Saturday Evening Post, American Magazine, Woman’s Home Companion, and The Delineator were promoted in the business world as being created primarily as vehicles for advertising. These new magazines created new opportunities for national advertisers as well as new demands on agencies.

With the rise of national advertisers and the advent of new media, advertising agencies changed to meet the demand of American business. Agencies expanded beyond their initial role as sellers of newspaper space. Some agents formed billposting companies, which erected their own boards and leased space. Others organized streetcar and magazine advertising, selling the media on a national basis. Agencies also learned how to create advertising campaigns and plan marketing strategies.

This activity led to the creation of national, and sometimes global, advertising organizations. New York City, the nation’s leading city in domestic and foreign trade, emerged as the center of advertising as major agencies opened up shop: N. W. Ayer & Son (1869); J. WALTER THOMPSON (1871); George Batten Co., later BBDO (1891); and Bates Agency (1893). Mathilde C. Weil, Mary Compton, and Meta Volckman operated their own agencies in New York, while other women found places in business as copywriters, advertising artists, publishers, agents, and representatives.
After the Civil War, industrialization, rapid urbanization, and massive immigration changed patterns of social life and the character of the American middle class. Manufacturers began to exploit people’s desire for fashionable things, as material goods became visible symbols of personal worth and identity. Marketers soon recognized that with a memorable brand name and attractive packaging, they could charge a higher price for their products; in turn, they urged consumers to accept no substitutes. Nationwide advertising put the trademark before the readers, and the copy told why the product was better. As a result, customers knew the brand they wanted before entering the store. Thus, early manufacturers boxed and advertised hundreds of cereals, packaged soaps, flour, cigarettes, matches, canned vegetables, fruits, milk, and soup.

By the turn of the century, manufacturers routinely introduced new brand-name products with a wave of advertising. Advertisers also gradually began to turn their advertising entirely over to agencies. With full responsibility for campaigns, the advertising agencies evolved into their presentday form within the first decade of the century. Advertisements now were but one component of planned campaigns that had to be integrated into appropriate and sound marketing strategies. Skilled copywriting, layout, and illustration became important in achieving continuity and strengthening selling appeal. The role of account executive also expanded from simply bringing in new business to providing a needed liaison between the business-oriented client and creative staff, while space brokers continued to shop around for the lowest bids for each media schedule. Market research, however, proved slower in getting started than copywriting, layout, and account management.
When four-color front and back covers and one- or two-color interior ads became standard by 1900, magazines exploded with color. While humor, jingles, and trademark characters kept the names of products in the public’s mind, they did not always sell them. A new advertising approach, called “reason-why” copy, shifted the focus of ads to sales arguments designed to overcome any resistance.

This hard-sell style was in sharp contrast to the simple brand-name identification campaign that sold the product name to the public. The print copy then had to convince customers they should buy the product, and at the same time, the sales pitch had to convince the merchant that he could make money by stocking it. In short, the copy style was straightforward and direct. It stated firmly what the product did and how it would benefit the buyer. In the process, reasonwhy practitioners John E. Kennedy, Claude Hopkins, and Albert Lasker established the copywriter as crucial to ad agency operations.

Until 1906, the advertising of this period was completely unregulated. In that year, Congress passed the Pure Food and Drug Act, which required manufacturers to list the active ingredients of their products on their labels. Still, advertisers could continue to say just about anything—and did.

The emergence of advertising as a legitimate enterprise was perhaps evidenced with the outbreak of World War I, when “patriotic” businesses, citizen groups, and even the government kept company names in the public eye and created national advertising programs to gain public support. After the 1918 armistice ended the war, manufacturers increased their advertising budgets and spurred the return to a consumer economy.
Following a brief depression in 1921, the economy took off on a period of rising prosperity. People’s newly acquired affluence also provided manufactures with a ready-made mass market. Ads sold cosmetics and goods to improve appearance—and an endless stream of new inventions to save time, eliminate the need for servants, permit the wife to leave the home, and improve the life of everyone. It was also a time of the general distribution of the telephone, electric light bulbs, electric phonographs, and cameras. The radio, another invention in this era, would have a profound effect on advertising and society.
Agencies seeking to gain a professional standing for their work supported the trend toward scientific advertising. National advertisers with multimillion-dollar budgets sponsored market and psychological research to ensure that their advertising proved an effective marketing tool. Professional journals advised the advertising industry that 80 percent and more of the readers of advertisements were women. Also, women were emotional; therefore, ads should portray idealized versions rather than prosaic realities. Keep the copy personalized and intimate. To fit these requirements, ads were filled with short stories where the woman was concerned about the impression she was making, her success in holding her husband, and the health or intelligence of her children.
Newspapers and magazines dominated mass communications until the first commercial radio broadcast in 1920. Over the course of the decade, radio emerged as a major industry through both the marketing of radio sets and the selling of airtime to advertisers. Most early station managers and many public officials, however, did not welcome commercial advertising messages, fearing that the dignity of radio would be compromised by the advertising chatter. But broadcast operating costs and pressure from the potential advertisers forced the issue, and commercial messages on radio eventually became acceptable. Ever since, radio has accepted advertising’s financial support.
At the same time, J. Walter Thompson led the ad industry in both innovative copy styles and the variety of services offered to clients. The agency’s billings more than tripled, from $10.7 million in 1922 to $37.5 million by the end of the decade, making it the industry leader in total billings, a position it maintained for the next 50 years.
The end of the Roaring Twenties was signaled by the stock market collapse of October 1929. In the worst depression in American history, a staggering number of people were unemployed, there was little money to spend, and few goods were sold. For the rest of the decade, until World War II broke out, the economy remained largely stagnant, and advertising suffered like any other sector of the economy. The total volume of advertising revenue plunged nearly 70 percent—from a 1929 high of $3.4 billion to a low of $1.3 billion in 1933.
Admakers faced the difficult task of promoting products that Americans either could not afford or were hesitant to purchase. In response, admakers increasingly resorted to hard-sell and even sensationalist campaigns. Ads of the 1930s were jammed with text, threatening slice-of-life stories, contests, premiums, prizes, and two-forone promotions. This resulted in a surprising backlash. New government regulations created heavy supervision and control over the way advertising was practiced, while a consumer revolt produced a series of commercially popular books that dramatized the most questionable advertising practices.
Another notable event during these years was the emergence of radio as a significant advertising medium. Different from present television formats, in which each commercial sells only one product, in 1930s radio the whole show advertised one product. Soap operas, begun in 1932, and so named for the soap companies that created and sponsored them, dominated daytime. Comedies and variety shows played in the evenings.
Advertising contributed to the World War II effort as well. After the attack on Pearl Harbor, the U.S. government revived the poster and ad programs that had been successful in World War I. The Office of War Information formed the War Advertising Council in 1942, producing the most extensive advertising campaign in history, promoting war bond sales, internal security, rationing, housing solutions, and precautions against venereal disease. As defense production increased, many wartime advertisers also found that the themes of patriotism and conservation fostered consumer loyalty and sold goods. With the defeat of Germany and Japan, the productive wartime economy slowly transformed into an even stronger consumer economy.
Following World War II, advertising realized its greatest prosperity since the 1920s. Between 1945 and 1960, gross annual advertising expenditures quadrupled, and automobiles replaced packaged goods and cigarettes as the most heavily advertised products. During this period, many advertising agencies merged, opened offices overseas, and expanded their services. This trend toward mergers arose as clients demanded more services such as research, sales analysis, package design, and publicity. Advertisers also competed in an increasingly cluttered marketplace as business boomed. For every new product four or five major competitors already existed. In order to sell more, businesses advertised more and demanded that marketing and advertising departments claim a scientific basis for their work.
And then there was television. Its rise from pre–World War II science experiments to a television set in nearly every home occurred in the 1950s. The developers of the new medium tapped the experience of the early radio broadcasters. Recognizing that shoestring operations characteristic of many radio stations were no longer feasible, TV established networks of affiliated stations. Initially, the national commercial networks were limited to the big three—CBS, NBC, and ABC.
As had been the case with radio, the television networks at first served merely as production and transmission facilities, while advertisers controlled the programs. Philip Morris cigarettes, for example, owned I Love Lucy, General Mills sponsored Betty Crocker’s Star Matinee, and Dutch Masters cigars funded the Ernie Kovacs Show. By 1950 TV advertising revenue reached $100 million; soon thereafter TV revenues overtook those of radio. Four years later, in 1954, television became the leading medium for advertising. By 1960 nearly every home had a television set.
The first television ads were simply televised radio commercials, and sometimes the announcer could even be seen holding the script. These commercials, as well as most programming until 1957 (except filmed entertainment), aired live because videotape recording had not yet been invented. Animated commercials also reached a zenith in the late 1950s, in part because they were less costly than glamorous models and actors. Advertisers also targeted children as a specific market to sell toys, cereals, and candies.
Full sponsorship of commercial entertainment faded from television during the 1960s when most advertisers decided that programs were too expensive to sponsor and strategically ran their messages on several other programs. When the networks took over the responsibility for programming from advertisers, they at first referred to advertisers whose commercials appeared during their programs as “participating sponsor.” Today most broadcast advertising is simply sold as spot announcements or “spots”— that is, the breaks between the programs.
Scenes of modern life, sentiment, and a reliance on science and technology characterized advertisements of this era. Two of the most significant advertising personalities of this period were Rosser Reeves of the Ted Bates Agency and consultant Ernest Dichter, best known for his motivational research (MR). Reeves emphasized science and research, and his ads typically featured simple repetition of a single theme, or the “unique selling proposition” (USP). Also, Reeves pioneered the use of the new medium of television as a force in American political campaigns. In 1952, he sold presidential candidate Dwight Eisenhower in the same way that he promoted toothpaste, with a USP: “Eisenhower, man of peace.”
Consumer researcher Ernest Dichter pioneered the MR approach, replacing the statistical techniques of polling and counting with concepts derived from psychology and psychoanalysis. MR examined what triggered people to make choices on the subconscious and unconscious levels. Noted for his work on Chrysler, for example, Dichter deduced that more men bought a sedan even though they were attracted to a convertible, because they associated the hardtop with their wife and the sportier vehicle with a mistress. But MR was not without its critics. The publication of Vance Packard’s best seller The Hidden Persuaders (1957) warned the public that large-scale efforts were manipulating people “against their free will.”
Advertisers, too, reinforced traditional family values. A profusion of ads pictured idealized versions of the mythic conventional family with well-behaved children and narrow gender roles. However, in the following decade people turned from science to inspiration, youth rebelled, and women and African Americans demanded inclusion and fairness.
Advertising during the 1960s was slow to respond to the massive social changes of the era. While the nation was struggling with civil rights, the Vietnam War, and the sexual revolution, advertising often portrayed women and minorities in subservient roles. It appeared that only white people bought and used products, and that women had few aspirations beyond the home and family.
What was revolutionary about advertising in the 1960s was “creatives” (art directors and copywriters) having a bigger say in agency management. Since the unique style of the ad design was so closely identified with a single artist and a single copywriter, the new project teams worked better in small agencies rather than in huge advertising companies. The result was that accounts moved their work from old-line, traditional agencies and took their campaigns to innovative, boutique advertising companies that were fast and flexible. And a wide variety of products, notably Pepsi, traded on youth and the idea of youth. The creative revolution, and the look it produced, is most often associated with four famous advertising agencies: Leo Burnett, Ogilvy & Mather, Doyle Dane Bernbach, and Wells Rich and Green.
In 1935, copywriter Leo Burnett opened his shop, Leo Burnett Co., in Chicago. Like Reeves, Burnett focused on the product but also sparked interest with good artwork, information, recipes, and humor. Burnett’s campaigns used a host of continuing characters called “critters,” as well as jingles, in both print and television ads. Likeable, animated characters created by Burnett include the Jolly Green Giant, Tony the Tiger for Kellogg’s Frosted Flakes, and Snap! Crackle! And Pop! for Kellogg’s Rice Krispies. The familiar cowboy, the Marlboro Man, became one of the great campaigns in advertising history.
When David Ogilvy opened his agency on Madison Avenue in 1949 (later Ogilvy & Mather), he believed that an ad should be a dignified explanation of what was being sold. The ad followed the Ogilvy formula: a handsome picture, a long headline, and straightforward, low-key copy. Ogilvy also devised unique hooks to capture the reader’s attention, and then repeated them to link his ads together. For example, the Hathaway man’s eyepatch, the Schweppes salesman’s Van Dyke beard, and the quietly ticking clock in the dignified Rolls-Royce all became identified with their brands.
The innovative approach of Bill Bernbach and his New York–based agency Doyle Dane Bernbach (DDB) represented another leading force in advertising. His ads were humorous, limited to a single selling point, and sometimes used only one sentence or two to a page. There were the campaigns for Volkswagen, Levy’s Rye Bread, and Alka-Seltzer. He believed that the purpose of an ad was to persuade people to buy, and anything that detracted from that idea and those words was bad design. Admakers need to simplify and to dramatize the selling idea to make memorable the message of the advertisement.
Mary Wells’s agency Wells Rich and Green started as one of the first major agencies ever headed by women. Wells produced memorable commercials for Alka-Seltzer’s “Try it, you’ll like it.” And for the Braniff International Airlines “Flying Colors” campaign, she painted the planes pastel shades and dressed the stewardesses in Pucci outfits.
It was also the beginning of the merger movement that swept the industry throughout the 1970s and into the next. Advertising agencies grew rich in the 1960s and early 1970s as corporations poured their money into creative campaigns. The ad agencies then poured their profit into in-house research, and they got larger. But that trend changed in the mid-1970s, when a severe recession and double-digit inflation stifled the economy. What had started as small, flexible idea-houses in the 1960s had become large and sluggish. The need for costly research activities and the huge sums of money resulting from advertising contracts set the agencies up for a wave of mergers and takeovers in the 1980s, combining them into a far smaller number of huge corporations.
At the same time, the civil rights movement led to more cultural diversity throughout the advertising industry. The most noticeable reform involved presenting African Americans in a range of normal occupations and tasks rather than as demeaning stereotypes. However, few African Americans worked on Madison Avenue in any capacity, professional or clerical. To address this imbalance, agencies created new training programs and white-collar positions for minorities. Several national African-American agencies also opened. In 1956, Vince Cullers had started the nation’s first African American–owned full-service agency, followed by Burrell, Inc., in 1971 and UniWorld headed by Bryon Lewis.
Women also took a cue from the successes of the civil rights movement, and the second wave of the feminist movement hit Madison Avenue. The women of the 1960s were a new phenomenon, better educated and more socially and politically aware. They also represented almost half of the total workforce in the country. In terms of marketing and advertising, women were not going to be influenced by the same advertising and promotional messages. But advertisers continued to address women in terms of “idealized roles” rather than “reality situations.” Feminist criticism did not abate until the advertising industry began to pay attention to feminist concerns with gender issues. By the mid-1970s, ads not only depicted the professional woman at work but also increasingly pitched her cars, homes, and insurance.
By the late 1970s, many women had opened their own agencies. Among these were Shirley Polykoff, Jane Trahey, Paula Green, Jo Foxworth, Lois Geraci Ernst, and two African-American adwomen, Joyce Hamer and Caroline R. Jones.
Advertisers faced still other challenges in the health hazards associated with tobacco and a revived consumerism. In 1964 the surgeon general announced that cigarette smoking was a health hazard that required remedial action. For advertisers this meant that warning notices had to be printed on every pack, and cigarettes could no longer be advertised on television and radio.
The 1970s also resulted in added REGULATION. First, a group of Boston women founded the Action for Children’s Television, which lobbied the government to limit the amount and content of advertising directed at children. Also, the FEDERAL TRADE COMMISSION and the industry’s National Advertising Review Board demanded higher standards of honesty and disclosure from the advertising industry. Most notable among the campaigns judged to be misleading were Warner-Lambert for Listerine, Campbell Soup, and Anacin.
A final point that needs to be made is that both consumers and formal regulatory agencies restricted advertising, yet technological advances posed unprecedented opportunities. The development of the VCR, cable television, and the laser disc all occurred during this period. Also, advertisers learned how to reach more specific audiences through the diversity of new cable TV programming such as ESPN, CNN, TBS, and Nickelodeon. In the 1980s, television advertising was influenced by the rapid-cut editing style of MTV, while infomercials presented a long advertisement that looked like a talk show or a half-hour product demonstration. Then came personal computers, laptops, and hand-held computer systems.
The success of Silicon Valley and the emergence of Pacific Rim countries also led to a flood of creativity from the West Coast. For the first time, New York City no longer dominated the creative scene. Creative marketers could now be found at the offices of California agencies such as Chiat/Day, Hal Riney, and Foote Cone & Belding. Other innovative agencies also appeared in such cities as Minneapolis, Dallas, Atlanta, and Portland.
In the 1980s, glamour, wealth, and power were back in style. Well-heeled, well-traveled consumers expected quality goods, fashions, furniture, and architecture. Despite rising production costs and an increasingly cluttered marketplace, manufacturers spent a great deal of money on image building for cosmetics, perfume, and fashion. Advertisers no longer described how their products worked or why they were better or different; rather, powerful images alone were expected to evoke confidence in the brand.
In 1987, however, the downturn on Wall Street signaled the “good life” was out and the “simple life” was back. The recession of the late 1980s continued into the 1990s and led to far reaching changes in the industry. Global competition also put American corporations under pressure to restructure, consolidate, and simplify.
The economic realities of the 1990s, combined with changing demographics and lifestyles, have created a new breed of savvy consumers. Advertisers also had to adapt to the concept that consumers have greater control of the information they receive about products and brands—and consumers give information back to the firms, for example, through e-mail and tracking of Internet surfing. The proliferation of cable television, direct marketing technology, and the growth of interactive, wireless, and broadband technologies has further fragmented the media. A growing investment in advertising has resulted in so much clutter that promotion options, such as online communication, brand placement in film and television, point-of-purchase displays, and sponsorships, are more attractive to advertisers.
As new technology presents new communication options, advertising as a process has not changed. So far, advertising is still a paid, mass communication effort to persuade and inform. As a business process, advertising continues to be one of the primary marketing tools that contribute to profits by stimulating demand and nurturing brand loyalty.
Further reading

• Fox, Stephen. The Mirror Makers: A History of American Advertising and Its Creators. New York: Vintage Books, 1983. 
• Goodrum, Charles, and Helen Dalyrymple. Advertising America: The First Two Hundred Years. New York: Harry N. Abrams, 1990. 
• Lears, Jackson. Fables of Abundance: A Cultural History of American Advertising. New York: Basic Books, 1995. 
• Marchand, Roland. Advertising the American Dream. Berkeley: University of California Press, 1985. 
• Pope, Daniel. The Making of Modern Advertising. New York: Basic Books, 1983. 
• Presbrey, Frank. The History and Development of Advertising. Garden City, N.Y.: Doubleday, Doran, 1929. 
• Sivulka, Juliann. Soap, Sex, and Cigarettes: A Cultural History of American Advertising. Belmont, Calif.: Wadsworth, 1998.

Juliann Sivulka