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 1900, marketers spent the modern day equivalent of $450 million on advertising. That year there were 3,500 magazines alone being published in the U.S., reaching an audience of about 65 million. By now, 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.