A History of Advertising
The first mass-distributed ads are said to have appeared in German news pamphlets in the 1500s. Over the next 300 years, advertising was often included in print media such as newspapers, but these ads generally stayed small, and similar to today's classified ads. It wasn't until the 19th century that advertising began getting really creative. Brand names became popular during the patent medicine craze of the Victorian era, and salesmen began using the logos and brand names to sell the products being mass-produced at the onset of the industrial revolution. Advertising was also applied to the entertainment industry. P.T. Barnum (of circus fame) is credited with pioneering the concept of integrated marketing and brand management -- he is also known for the famous remark "there's a sucker born every minute."
As America grew and expanded westward, marketers expanded across the nation, increasing the need for advertising. The French introduced a cheap papermaking process in 1841, which contributed to a boom in the newspaper business. With few government restrictions, the advertising industry was able to grow quickly and virtually unfettered. In the mid- to late 1800s, so-called advertising "brokers" such as James Carlton (the predecessor to J. Walter Thompson) and Volney Palmer (predecessor to N.W. Ayer) acted as intermediaries between marketers and the media. The two agencies made commissions of up to 50 percent placing ads in newspapers and magazines.
The birth of the advertising agency
Claims vary, but it seems that the term "advertising agency" popped up somewhere between 1850 and the turn of the century. (Volney Palmer is popularly credited with coming up with the term in 1850.) Whatever they were called, these firms offered an indispensable service to marketers across the nation. It wasn't long before agencies began expanding their roster of services to include artwork, copy and layout production. N.W. Ayer and J. Walter Thompson, who both vie for the distinction of oldest American agency, also contend for the title of first full-service agency: N.W. Ayer had a full-time staff for planning, creative duties, production and placement in 1875. JWT's claims lies in its performance of the same duties, alongside specialties such logo and package design. Among those crafting copy for the campaigns around the turn of the century were literary icons such as F. Scott Fitzgerald and John Marquand.
According to Advertising Age magazine, in the first year of the 20th Century, marketers spent the modern day equivalent of $450 million on advertising. That year there were 3,500 magazines published in the U.S., reaching an audience of about 65 million. By that time, placement commissions were becoming standardized, which helped to legitimize the industry. Price competition was finally eliminated in 1921, after the American Association of Advertising Agencies (the Four As) lobbied to establish a 15 percent fixed commission on media billings. Once the standard was set, agencies shifted their focus to marketing. Instead of simply creating ads, they began offering strategic advice on branding, new product development, and packaging pricing.
The role of research
Though advertising was a popular marketing tool in the first part of the 20th Century, there was no real way to measure its effectiveness. As department store mogul John Wanamaker remarked around the turn of the century, "I know half of my advertising is wasted, I just don't know which half." In 1921, in an effort to develop more effective campaigns, J. Walter Thompson hired Harvard University's John Watson, the "Father of Behavioral Research," to find out what makes consumers tick.