Advertising and Marketing

The advertising industry is a global, multibillion-dollar business that serves as a conduit between manufacturers and consumers. Whether for nonprofit organizations or Fortune 500 companies, advertising agencies are hired to cultivate brand identities, persuade consumers to switch brands, launch new products, and lobby for political issues. The advertising industry creates and manages the connection between companies, products, and consumers, translating their clients’ messages into effective campaigns. Advertising can stimulate buying, increase sales, and help to jumpstart the economy. The economy, though, can also affect the advertising business. When the economy slows down, consumers tighten their wallets, and manufacturers, in turn, reduce production and scale back on promotions. Ad spending decreases and so, too, does ad revenue.

Popular media and technology drives this industry. Before the advent of radio, television, and computers, print publishing was the main, and often only, method of advertising, with ads appearing in newspapers and magazines, flyers, and on billboards. Benjamin Franklin pioneered advertising tactics in his newspaper, the Pennsylvania Gazette, when he placed headlines, advertisements, and illustrations alongside editorial content. Franklin also owned a stationery store in Philadelphia and is believed to have been the first to create the mail-order catalog, selling stationery and books to out-of-town customers. Until the mid-1800s, little changed in how print advertisements looked. In newspapers, all print ads were usually a single column wide, did not have special type, and, unlike the Gazette, appeared without illustrations. Many publishers weren’t in favor of advertisements and often separated them from the rest of the content. Magazine publishers, for instance, isolated advertisements to the back pages.

By the mid- to late 1800s, a large percentage of advertisements were about patent medicines, and the messages focused on the public’s health fears. The statements were often dramatic and outrageous (e.g., medicines that could “cure any ailment,” etc.), and did little to convince society that advertising was a serious business.

The adman’s reputation improved, however, during the Industrial Revolution, which brought mass production and the wider proliferation of advertising. More manufacturers with diverse products needed to advertise nationally to expand their customer base. Companies hired advertisers to secure advertising space in publications as well as to create copy and artwork, and to strategically place ads where consumers would see them. In the early 1900s, stores such as Macy’s, Marshall Field’s, and Wanamaker’s turned to advertising to reach customers. Radio, television, computers, smartphones, and the Internet have since added other mediums through which advertisers can reach consumers.

Until the 1980s, clients could find myriad marketing services in a single advertising agency. Once the media industry started to grow, agencies diversified and spun off their specialized in-house departments into separate agencies. Massive consolidation of agencies has further changed the industry’s landscape. Independently owned agencies still exist but are far outnumbered by group-owned agencies and holding companies, which are parent corporations that own (or hold) stocks in other companies. Holding companies aren’t involved in the day-to-day advertising tasks but instead work with the companies’ board of directors, helping to set policy and strategy.

Traditional advertising agencies come in three shapes: worldwide networks, with multiple offices around the world; micro-networks, with only a few offices in other countries; and independent, standalone groups, which usually operate in only one office and only in their country. These networks and groups may be full-service agencies, creative boutiques, or media planning and buying agencies. Advertising agencies themselves have seven major departments: account services, creative, media, account planning and research, business development, production, and traffic (also known as project management in a growing number of agencies).

When the economy is healthy, the advertising industry thrives. Companies are more willing to budget for ad and marketing campaigns because consumers have more expendable income, and ad revenue likewise increases. Madison Avenue is still grappling with repercussions from the recent recession, though. Kantar Media, a research consultancy that’s part of the WPP Group, released a report in June 2013 that showed American ad spending had remained flat in 2013 over 2012 for the first quarter of the year, with ad spending down by 1.0 percent compared to the same quarter of the previous year. The greatest declines in ad spending were in newspapers and radio media. On a positive note, ad spending in magazines and television rose slightly in that quarter compared to 2012, with Spanish language television ad spending having outstanding growth overall (up more than 13.5 percent in the quarter). Ad spending increased the most in personal-care products, restaurants, and telecom categories.

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