A Short History of Advertising

“Modern consumerism is the best-funded social science experiment in the world.” -Rory Sutherland

Mad Men is one of my all-time favorite shows. My wife and I even dressed up as Don and Betty Draper for Halloween during the early years of the show.

I’m currently rewatching the show on Netflix. The first season finale might be the single best episode of the entire series.

Don gave his masterpiece in a pitch to Kodak:
 


 
The Kodak people were so taken with Draper’s presentation that they canceled the remainder of their meetings with the other advertising companies.

These lines are so good:

In Greek, nostalgia literally means ‘the pain from an old wound.’ It’s a twinge in your heart, far more powerful than memory alone. This device isn’t a spaceship. It’s a time machine. It goes backward, forward. It takes us to a place where we ache to go again.

It’s not called “The Wheel.” It’s called “The Carousel.”  It lets us travel the way a child travels. Around and around and back home again. A place where we know we are loved.

We all know this is a TV show but Jon Hamm’s wonderful acting skills along with some excellent writing and storytelling create a compelling pitch. But that’s all advertising is. It’s storytelling and pushing the right emotional buttons to earn a response from those who are watching or listening.

I’ve watched this scene multiple times yet it still sells me every time.

We’re all in advertising in some form or another.

We advertise ourselves to prospective employers, romantic partners, friends or social media followers. Just getting people to pay attention to you requires the ability to tell a decent story, whether that’s in the office, on the golf course or at a party.

But companies advertising their products or services to the masses is still a relatively new thing.

News as a luxury item

In the 1830s, New York City’s most popular newspaper was just 4 pages and circulated to fewer than 3,000 people in a city with a population fast-approaching 300,000. News was a luxury item, costing 6 cents an issue, which was too expensive for most people at the time.

Then 20-something Benjamin Day had an idea. He would sell his own newspaper for just a penny, undercutting the competition. To make up for a lower price, he would sell advertisements. The idea, which was novel at the time, was not just to sell newspapers to his readers, but to sell the attention of his readers.

Tim Wu wrote about how he did this in his book The Attention Merchants:

Day’s idea was not to offer such a notice board but rather to sell his readers’ attention en bloc to more substantial advertisers. But for such undifferentiated attention to be valuable to anyone, he would have to amass a giant readership. That would mean making the New York Sun alluring to the broadest segment of society—by any means necessary.

“The object of this paper,” he wrote, “is to lay before the public, at a price within the means of everyone, ALL THE NEWS OF THE DAY, and at the same time afford an advantageous medium for advertising.” His plan for delivering on the promise of such a broad readership was to feature stories from which no one could look away.

Day scoured the courts and police reports for wild stories that would get people to read and come back for more. In essence, he understood clickbait nearly 200 years before Buzzfeed was created.

Within a few months, he was selling thousands of copies a day. By 1870, there were nearly 600 newspapers with a circulation of almost 3 million people. According to Robert Gordon, those numbers would grow by factors of 4 and 10 over the next 40 years.

Competition eventually caught up with Day but the idea that you could sell attention would set the stage for the next breakthrough in advertising to take it up another level.

Innovation sparks an advertising boom

In 1870, there was little in the way of entertainment options.

There were no major sporting events. No television. No movies. No Netflix. No record players. No telephones. No radios. And no electricity so I’m guessing people just went to bed early all the time.

By the 1920s, that had all changed.

At the end of the Roaring 20s, people had access to movie theaters, phonographs for playing music and radio. Radio was one of the first technological breakthroughs that allowed families to come together for leisure time where they didn’t have to pay attention to one another in their own living rooms.

In Don’t Fall For It, I wrote about the immense growth in this new form of communication:

Companies began advertising their products in the late nineteenth century, but the 1920s is when advertising exploded into popular culture. The radio had a great deal to do with its spread. The first commercial radio station was launched in 1920. By the end of the decade, radio penetration went from basically zero to close to 40% of households. By 1940, more than 80% of households had a radio. The adoption of radios in households was faster than electricity, automobiles, or the telephone. Comedian George Burns wrote in his biography, “It’s impossible to explain the impact the radio had on the world to anyone who didn’t live through that time.”

Radio sales doubled in 1923, and then tripled from there by 1924. The biggest reason radio spread like wildfire is because it was free. There was nothing else to pay for once you purchased it. And the reason it was free is because the business model was predicated on advertising. […] When the radio went mainstream in the 1920s and revolutionized how we communicate with large groups of people, it was controversial to advertise on the platform. In 1922, future president Herbert Hoover even said, “It is inconceivable that we should allow so great a possibility for service, for news, for entertainment, for education, and for vital commercial purposes to be drowned out in advertising chatter.”

Hoover wasn’t thrilled about the potential for advertising on the radio but that was the only way to make it available to the masses. And the 31st president of the United States was oblivious to the fact that the world of marketing was only going to get bigger from there as technology continued to evolve.

Adding visuals was a gamechanger

By the 1950s, radio would pass the torch to TV as the dominant form of grabbing people’s attention for advertising purposes.

In 1950 roughly 9% of American households owned a television set. That number jumped to 65% by 1955. By the early-1960s, the penetration was over 90%.

And the advertising industry was possibly one of the biggest beneficiaries. Radio was a nice way to send a message but the ability to use visuals to sell your product was a game-changer.

David Halberstam describes this shift in his book, The Fifties:

Radio advertising had been clever and deft and had greatly expanded the possibilities for reaching the consumer; but television opened up the field even more dramatically and offered a vast array of new techniques, from the subtle and sophisticated to hammering away with a brief, repetitive message. At first the television departments of the major agencies were small, understaffed, and lost money. That changed quickly enough. “We discovered,” said Rosser Reeves, one of the prime architects and beneficiaries of television advertising, “that this was no tame kitten; we had a ferocious man-eating tiger. We could take the same advertising campaign from print or radio and put it on TV, and even when there were very few sets, sales would go through the roof.” The speed with which television’s power ascended awed even those who prophesied it: In 1949, Madison Avenue’s total television billings were $12.3 million; the next year, it jumped to $40.8 million; and the year after that, it jumped to $128 million. Television, of course, could do what radio never could, for it was visual. “Show the product,” said Ben Duffy, one of the men who was writing the rules even as he learned them, “and show it in use.”

Television was a boon to the advertising industry for those marketing firms who were willing to be first movers in the space:

The advertising firms that adapted most readily to television tripled and quadrupled their annual billings; BBD&O, where Ben Duffy was an early booster of television, shifted 80 percent of its media buys to television, and by 1950 the television department had grown from twelve people to 150; Duffy was well ahead of the curve, and he was rewarded for his foresight: The firm went from billings of $40 million to $235 million in the fifteen-year period from 1945 to 1960.

The advertising industry is like some Marvel comic-book movie villain who only gets stronger as they jump from host to host (or platform to platform in this case).

The more options they have to gain people’s attention, the harder it becomes to ignore them because they understand how to influence people as much as anyone.

Advertising will only get more targeted in the future

In People of Plenty, historian David Potter wrote, “Advertising now compares with such long-standing institutions as the school and the church in the magnitude of its social influence. It dominates the media, it has vast power in the shaping of popular standards and it is really one of the very limited groups of institutions which exercise social control.”

Social control these days for advertisers means knowing more about their end buyer than ever before.

In The Power of Habit, Charles Duhigg tells the story of an angry father who stormed into his local Target store clutching a handful of coupons they had sent to his teenage daughter.

The man was clearly angry, shouting, “My daughter got this in the mail! She’s still in high school, and you’re sending her coupons for baby clothes and cribs? Are you trying to encourage her to get pregnant?”

The manager was confused and apologized. He called the man a few days later to apologize one more time but the man stopped him, saying, “I had a talk with my daughter. It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

The Target store manager had no idea there was a program in place at the corporate level to better understand their customers. This included a pregnancy-prediction model based on female buying patterns. Target figured out this teenager was pregnant before her parents did and updated their advertising accordingly.

This stuff is only going to intensify in the years ahead as the number of platforms continues to increase.

Sportsradio personality Colin Cowherd appeared on the Ryen Russillo podcast this week and discussed how advertising has changed over his 20 years in the radio business. In the past, the only options were AM and FM radio. Pretty straightforward.

Cowherd says, “I now have an AM, an FM, an XM Sirius, a podcast, a cable, a YouTube, a Twitter and we monetize all of them.”

Fox Sports, the company Cowherd works for, makes more money from a YouTube subscriber on his channel than a cable subscriber.

It may be harder than ever to get people’s attention these days because our entertainment options are now seemingly unlimited.

But the leaps forward in technology have given advertisers more avenues to reach us than ever before. And they have the ability to personalize to the end-user because so much of our lives are now available for everyone to see online.

The avenues will change and things will become more personalized. The advertisers understand human nature as well as any other industry.

That will remain the constant because human nature isn’t changing anytime soon.

Further Reading:
World War II: The Economic Anomaly

 
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