Tracing the Evolution of Advertising: Past, Present and Future Trends

Have you ever wondered how the pioneers of the advertising industry would react to today's digital landscape? Buckle up as we take you on a riveting journey tracing the evolution of advertising, from the groundbreaking campaigns of the 80s to the rise of programmatic advertising in the internet era. Tony Hines, will unleash the insider stories, dissecting the good, the bad and the controversial of an industry that is constantly being disrupted and reshaped by technology. 

We will navigate the stormy waters of market competition, the pressing need for a digital economy and the role of industry leaders in this transformation. Unravel the challenges of misinformation and privacy in this digital age and arm yourself with strategies to enhance your digital engagement capabilities. As we delve deeper, we'll uncover the current and future trends that are carving the advertising landscape. From the power of personalization to the rising tide of online video streaming, we'll examine what these trends mean for advertisers and marketers. So, don't miss out, tune in, and be part of this enlightening conversation.

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Transcript

Speaker 1: 0:00

Hi, tony Hines here and you're listening to the Chain Reaction Podcast, all about supply chain advantage. Well, thanks for stopping by. We've got some interesting things on the show today, so hope you're going to enjoy the episode. Hello, welcome to the Chain Reaction Podcast. I'm Tony Hines. Now we have a series of three programmes and this is the first. So the first one is on how the advertising industry has changed in the past decade or so. The second one we'll deal with the demise of the third party cookie and what that means for advertisers and marketers, and the final programme will focus on programmatic advertising and that's the techie side of how advertising now works in this digital age. So hope you're going to enjoy these programmes.

Speaker 1: 0:43

And it's the front end of the supply chain. Of course, it's where the demand is created before we enter into the supply side. Often when we think of supply chains, we begin by looking inside the first organisation in the process and we see how they bring in raw materials and work in progress and the operations they perform before they move the products and services onto customers. But if we go back a stage and we think about how demand is created in the first place, that's where the supply chain really begins when the demand is created, and one of the first processes that most businesses engage in at that stage is to make consumers and customers aware of their products and services, and often they do that by advertising. And so today I want to talk about advertising, that very first step to create demand. The only constant in advertising is change. Agility, adaptability and resilience is key to staying ahead in another changing industry. World Advertising Research Centre WARC said that global advertising spend was expected to reach US$865 billion in 2022, and that's up US$641 billion since 2016. So let's take a quick look at the industry.

Speaker 1: 2:08

A few years back, I was involved in a House of Lords inquiry taking a look at advertising in the digital age, and they made some interesting points In that report. They said that the participants involved were advertisers, advertising practitioners, media owners, tech businesses and online platforms. So they're the players and they're five key areas of involvement. I've been talking to media audiences recently and the people connected with consumers were those adverts play out, whether online or offline. In the United Kingdom, advertising is likely to increase by 4% in 2024, that's according to the Advertising Association and the value of advertising in the UK will be $37.1 billion, which equates to about 1.1% growth in real terms. If we look at some of the key points that came out of that UK Advertising, in a Digital Age report from the House of Lords they said that advertising traditionally supported media, but it now funds all kinds of other online content and services. Secondly, they noted that industry regulated advertising aims to be legal, decent, honest and truthful, and that comes from the Advertising Standards Authority in the UK. It's their motto. If anybody has watched any recent TV adverts in the United Kingdom, there's a campaign running presently by the Advertising Standards Authority to push home the point that they're looking after consumer interests, making sure that adverts are legal, decent, honest and truthful.

Speaker 1: 3:44

The advertising industry itself is in a state of flux. The internet has changed the game. It's far more competitive. There's more spending on digital advertising than any other form of advertising media and for news and media publishers they're struggling with ad revenue because of the decline in print. And although they've moved online, it does threaten the high quality content that they produce because if they can't fund their newspapers from advertising, essentially it puts the costa and pushing the costa means that they have to charge higher prices for what they have to sell. And in recent times, of course, as newsprint has declined, they've gone online and put paywalls up Not all of them, but most of them have. So, for example we'll look at some basic statistics a bit later on that will show this more clearly we also see that the growing proportion of digital advertising is delivered through what's called programmatic advertising processes. These are automated processes and I'll explain how they work a little later in our discussion.

Speaker 1: 4:48

Now, if we took a look back to the 1980s, we'd seen new technology. Then. A decade in which advertising flourished were things like cable TV, video, cassette recorders, which I often refer to as the first ad blocker, because you were able to just pause the tape or run fast through any adverts, and personal computers were just coming on stream. So ads targeted specific segments of consumers, for example women, youth, minorities, and some of the most successful campaigns of the era were run by big brands such as Coca-Cola, pepsi, calvin Klein in fashion and MTV. Music TV was just coming on stream. If we look at the 1990s, advertising became more global, interactive and ads began to leverage the power of the internet, email and digital media to reach and engage consumers. Some of the innovative campaigns during that particular era were adverts for Absolute Vodka, got Milk, bud, viza, and, of course, it's when the first placement advertisements in television and film were beginning to happen much more In the 2000s. Of course, everything changed. We enter the digital age, advertising evolved and social media changed everything, mobile devices and online platforms all coming into the fore. Ads focused on creating viral content, user generated content, personalized experiences, and some of the viral campaigns were things believe it or not old spice, dove, real beauty and, of course, there were things like films, like the Blur Witch Project.

Speaker 1: 6:38

If we look at some of the key points that came out of the report, concerns about the competition in the market and transparency are two things that regulators have really focused on. They say that the market is dominated by a small number of very large companies, which it is, and these are big tech companies mainly. But given the lack of transparency, they recommend that the competition of market authority, that's, the UK body, investigate the market to ensure that it's working fairly for consumers and other businesses and is it fit for a 21st century digital economy. There were also concerns about advertising fraud and you'll see some statements that were made in the written evidence to that report from Sky UK. So they're worried about malware, they're worried about inventory fraud and they were worried about infringements of content and so on, and, of course, the bots manipulating the stats, the clicks and so on to inflate the effectiveness of the advertising.

Speaker 1: 7:41

Now the way I've structured today's webinar is to look at the changing nature of advertising, some of which we've discussed briefly just now, learn from that past, focus on the priorities for today and talk about how we can create our media future. Here's some other statistics which are quite interesting. These are the leading companies involved in earning their income out of advertising revenue, and you can see here in the digital space we've got all these big tech companies Google, by far the biggest, facebook, amazon and so on, trickling down to Spotify on that list, but there are others as well, and in the United Kingdom alone, in the digital advertising space, facebook have about 50% of that market and Google have about 10%. The priorities are to improve digital engagement capabilities, maximizing return on investment of content and to understand which channels or platforms consumers spend the most time on, and they also want to diversify income streams to spread risk and optimize revenue and profitability. The challenges that we've discussed are managing misinformation, ensuring effective first party data collection and the increasing scrutiny over operations by public authorities and external bodies. So there are two pathways to the future Does the traditional advertising route or does the programmatic advertising route, which we've mentioned?

Speaker 1: 9:05

Traditional advertising has a broad reach, gives access to a wide audience and people are familiar with the channels in which that's going to be broadcast. There's brand recognition and trust from consumers in the traditional routes, but the drawback is it's high cast, it's less targeted and it's often difficult to measure. In programmatic advertising, they use artificial intelligence to reach consumers that are most likely to engage. They can be cost effective because it operates on a paper impression model, reducing waste spend. It's flexible campaigns can be adjusted or halted instantaneously. But there are drawbacks in the sense that it requires technical understanding and data privacy considerations and the other thing I haven't put in there there is also where these adverts are likely to emerge, a question of trust again, but we'll come to that later as well. That's briefly just a diagram of the advertising ecosystem that shows you the content creators, the distributors, the people who commission the adverts, the consumers and the media choices, and we're focused on moving through those. I mean publishers and platforms are important to our discussion today, and the choices of strategy, media and value are important too.

Speaker 1: 10:21

Now, when I was thinking about this particular talk that he is a little image of one of the first TV adverts in the United States and it was for beloved watchers. He had a four second runtime that was just this very poor quality image that was shown and it just had a voiceover that said America runs on below the time. And that was it, and it cost $9 to make it. It was $4 for the image and $5 for studio time and it was a very effective advert, but I think it's a bit more expensive than that now, isn't it?

Speaker 1: 10:53

Let's take a look at programmatic advertising, because this is a big part of the industry now, and here's my diagram of the supply chain for programmatic advertising. It's a very simplified diagram, but you can see you've got advertisers at the one end, on the demand side platforms. You've got the ad exchange where the bidding process takes place, and you've got the supply side platform where the publishers market their inventory to say, yeah, we've got these opportunities for advertising with these sort of communities and people, the target audiences that we have access to and we're interested in your advert that you've just put up there. If you want to put it through our channel, that's fine and this is all instantaneous. It goes out through an auction bid process and it's all automated. And you can see down the bottom, some of the big players in this market for the tech companies, facebook ads manager, rocketfuel, mediumamazon, so on. And on the right, on the supply side, pubmatic you'll be familiar with these OpenX, google Ad X and so on. Going back to the diagram that they produced on the basis of some written evidence that was submitted to the UK, advertising in a digital age, you can see here how money is spent in the value chain between those various partners in the supply chain. And those are the percentage breakdowns 10% agency, 5% on the trading desk, 15% data management platforms and right through to the publishers, where they spend 29%. So that gives you some idea of the spend.

Speaker 1: 12:27

Now I'm going to take a look at what this means in our analysis of the market, and traditionally we would look at the political, economic, social, technological factors that influence the market, and in this diagram I've just listed some of the big things. So we've got regulations on the left hand side as political matters, with all the general data protection and the various legislative acts. Then we've got the changes in social behavior that are happening. People want data privacy. They've got ad blockers and tracker blockers because they don't like interference when they're online. They really want to stop all this interference from adverts. Economic factors, changing consumer behavior, cost of living, inflation, disposable incomes falling all those things will change the mix. And then on the technology side, you've got all the changes that are happening in data, marketing, data analytics, consumer privacy controls, and they add tech and so on and various innovations, so they all lead to the threats and opportunities that play out in the industry.

Speaker 1: 13:32

Here are some stats that you will also be interested in about the decline of print media between 2002 and 2020. So over that period of time, 18 years publishers lost 52% of their revenue, and you can see the numbers. Periodical publishing also lost revenue. Print media newspapers have dropped 25% in terms of consumption over that period, and magazines have fallen by 19%. There's been use use room reductions in the last 10 years. 83% have reduced the number of journalists on the staff, so there's a concern about quality content and 78% cut the space for journalism in print. Print readership time plummeted 56%. Advertising revenues decreased by 7.5%. Traditional media ad spending fell 22.5% just over in 2020 due to the effect of COVID, but generally, advertising revenues have fallen, as has interest in print and some of the external factors that have been shaping the future of advertising.

Speaker 1: 14:36

I've put into these trends. The market itself is volatile, uncertain, complex and ambiguous. The first trend is that there's more regulation from government, and people are also concerned that the industry regulates itself by being more ethical in its approach. There are also trends in the wider economy with regard to sustainability that have risen right up the agenda, and if you look on many surveys, many polls that are conducted online and offline, you'll see sustainability is number one or two in that list. People want a world where people, profit and planet are the focus of some attention. The fourth trend is social change with regard to diversity and inclusion, and people want a further society, and I think this has risen in importance during the pandemic period. There was a greater interest in diversity and inclusion during that time, but it's been growing for some time. But it's really quite important now and people also expect a degree of personalization in the way they deal with all types of organizations.

Speaker 1: 15:45

Another thing is the data privacy, and we'll come to this a bit later on, because cookies and third party cookies are dropping out and it's going to be important for people in the ad industry to ensure that they have access to first party cookies, first party data, to have the metrics and to understand what's going on in the marketplace, because it's a very murky supply chain. It's a very I think that term murky came out of the discussion in the House of Lawry Ports as well it's not always transparent what's going on in this supply chain and, of course, technology shifts present both opportunities and threats, and it's important to stay ahead on the curve with technology and again, we'll talk about that a little more. So we've seen the past, we've got to learn from it and we need to be thinking about diversifying our revenue streams with regard to print media, and you'll know that one of the big changes in print media has been to move towards subscription models, sponsored content as also an interest in generating income out of events and conferences and linking those into the mix of generating revenue, and there are great opportunities to do this using digital technologies. There's e-commerce and affiliate marketing that can also take place. Through the process, you can monetize data, you can crowdfund and ask for donations, as do some organizations, and you can diversify.

Speaker 1: 17:20

Diversification is the key, but you can't diversify at Infinite. You have to focus on some key things and we're going to talk about strategies as we move through, but let's look at some more stats just before we move on here. You can see the growth. This was done by eMarketer, but you can see the growth of US social network ad revenue by those different organizations on the left. So TikTok, as you would expect, fastgrowing LinkedIn, reddit, but these may not necessarily all fit your target audience, so you have to be careful how you take this information in, process it and act on it.

Speaker 1: 17:59

That's how advertising has changed over the years. 1980s, that's what it was like. 1990s and 2000s moved to this digital space. Don't have spent too much time on that, but just have a look at that to remind yourself of the changes that have happened In advertising. There are always challenges, and three of them are reaching the right audience, measuring the impact and staying ahead of the competition, and those are ways in which organizations can always create an advantage in the marketplace. If you can focus on the right customers at the right time in the right place and you can get feedback analytics that tell you which is the most effective means of advertising, then those things are important and it's important to watch what your competitors are doing so they don't get left behind.

Speaker 1: 18:47

Now I thought I'd just have a look at the seven ages of men. It was a very Shakespearean thing, this, really. But if you look at that, going from when you're born through to over 69, plus, there's the breakdown of populations in the United States and both the UK, so you can see the different audiences that we try to target and we normally target people either through geodemographics, which is this kind of analysis here, or we go through psychographics what people are interested in or we use another technique. So there are different ways that we break down our markets and our consumers and our customers to understand who to target in the marketplace. And then I've just overlaid it here in a second with this Facebook advertising audience and you can see the age bands that they target, both split between male and female, and you can see that they peak in the 18 to 24 through to 45 to 54. Those are the biggest areas, for them Doesn't mean that the others are an important, because for your market, if you're focusing on a particular product or service that is applicable to the over 55s, then of course that's the market that's interesting to you, but it just gives you an idea of that demographic profile and then, if I overlay that onto that other graph we had about the seven ages, you can see where it fits in. So we're really talking about generation Z, millennials and generation X being the big targets for Facebook, but of course, boomers and what they call the silent generation it's a nice term, isn't it Also do use Facebook and it's important not to overlook them.

Speaker 1: 20:28

Now, the second thing is, outside of those first level challenges that we talk about, getting the audience right and getting the message right and the communication process to that target audience. These are the wider concerns that are happening. So, as I mentioned earlier, sustainability, diversity and inclusion, the access to first party data. Another thing that's happened is this idea of having branded content so that you can actually sell space in the publication market, employing new technologies, the idea of consultative selling by attempting to work in partnership with organizations. And the final thing, which is, to me, one of the most important, is brand safety, and by brand safety we're talking about reputation. So it's about making sure that your adverts and your processors protect the reputation of the brand. So, for example, you don't want incompatible brands with your brand if it's going to damage your brand.

Speaker 1: 21:30

Let's take a look in this next part at social media trends, and you can see here some of the big trends. 3.6 billion social media users worldwide that's a lot of people. That was in 2020, so it's nearly half of the world's population just under half, it's 45% of the global population. And Facebook is the most popular 2.6 billion monthly users who are active. Instagram over a billion. So meta has 3.6 billion people, so they've got 45% of that market. And here are some of the trends.

Speaker 1: 22:04

For sustainability and ethical consumption, 81% of consumers feel very strongly that companies should help improve the environment, and that's growing on a daily basis. 73% of millennials and Gen Z consumers are willing to pay extra for sustainable products. This is out of survey data, so we have to be careful, of course. So a word of caution saying that you're going to do something is not the same as actually doing something. So 73% might say they're going to do that, but how many of the 73% actually act on it? Well, haven't got any figures for that, but we'll have to take it on trust. For now. 79% of consumers consider a company's social and environmental commitments before making a purchase, and I think that's probably higher at those Gen Z, gen X and Gen Y target audiences. This is what they say about personalization and customization trends 91% of consumers more likely to shop with brands providing personalized offers and recommendations, 80% more likely to make a purchase from a brand that provides personalized experiences, and 63% expect personalization as standard.

Speaker 1: 23:11

There's also a trend towards online video streaming. Global revenue from that source was projected to reach around 160 billion in 2020. Youtube is the most popular, with over 2 billion monthly active logged in users. Now there are a lot more people that use it YouTube and login, of course. In 2020, the average time spent watching online videos was to be 100 minutes a day. These are very congested markets, I have to say as well, because some of the comments from various reports that I've read, and probably you've read, talk about this congestion of competing for viewing time, and I think that's more and more of a concern as time moves on. This was a recent advertising association walk expenditure report from July 2023, and I've just highlighted with my blue callouts there some of the key areas of growth and you can see video on demand. Broadcast video on demand is a growth area. Digital growth, online growth and, of course, cinema has had a resurgence. So those are some areas that you might want to think about expanding your advertising spend in in future. Obviously, it depends on your target audience and you'll have to make that decision for yourselves, but it seems to me picking out areas where you might be able to get some traction and some advantage could be in those particular areas.

Speaker 1: 24:40

So, for future transformation, there are four possibilities personalization, immersiveness, ethics and innovation. With personalization, advertisers are far more customized and they have to be relevant to the individual consumers, to the target audiences that you want to reach, and the measure of success, in a way, is to employ the technology so that you can use AI to understand what's going on in the marketplace, getting feedback and analytics that do that, and to get that right message at the right time to the right person. That's the key, and it always is the key in marketing, isn't it? And then we think about immersiveness. Advertising will create more engaging and interactive experiences for consumers using technologies that we all are aware of virtual reality, augmented reality, 3d and haptics. Ads will appeal to multiple sensors and emotions, allowing consumers to participate and, in some cases, in a virtual environment you can co-create. So you can co-create the experience, and I think there'll be more opportunities to do that as the technology improves and it's probably going to be quite rapid.

Speaker 1: 25:52

Ethics, of course, scrutiny and, of course, the legal aspect of our advertising advertisers doing the right thing to protect consumer trust and to protect the integrity of the partnerships they have with the various organizations that they work with. And there is, of course, the respect the issue of respect about data rights. And then there's innovation innovation in terms of new formats, channels, platforms and how consumers interact, and I've listed a few there and some are more relevant than others. Then I've picked out just a few strategies from the list of possible strategies. And native advertising is certainly a popular approach and this is paid media that blends seamlessly, as it says they're, into the website content. But there are concerns that do we trust the website? Do we trust this sponsored content? Is it transparent that it is sponsored content? Is it ethical and is it legally compliant? So you have to be very careful how you follow a native advertising model, but it does work and can work very well for organizations who understand those concerns and address them.

Speaker 1: 27:10

Social media advertising the same it's cost effective, it's targeted and keeps engagement with the audience. But again, there are trust, transparency, ethics and legal compliance issues, and, of course, we all know about the influencer market, but they've got similar things. It's a big market. It's projected to become a 15 billion industry last year, but it's probably much higher than that. But there are the same concerns and authenticity and transparency are the big ones. So there's the future of advertising. That's a transformation we wish to make. As technology advances, advertising becomes more personalized, interactive, data driven, and there are all those technologies AI, ar, vr and voice technology which will play a big role.

Speaker 1: 27:54

Today's priorities I said I'd return to the issue of data and I just want to remind you that first party data is important to collect and that's the data that we gather from our websites, visitors, social media followers and leads, and it creates opportunities for personalization, for targeting relationships, accuracy, control and cost. Second party data I'm not going to say too much about, but third party data we know is going to be changing as a result of Apple, google and other big tech companies getting rid of the third party cookie, and that was very useful because it actually gave demographic information, purchase history and online behavior. So if you're going to lose access to that data, of course the big tech companies won't, because they've got other means of you know, for example, through the sandbox. Google is still going to be able to get to some understanding of what's going on, so they'll have the data, but you won't. Now is that important? Well, on the one hand, it's important to have as many first party data sources as you can, because that gives you control and it does give you transparency. But Google will be able to offer you still some kind of data, but, of course, you won't have control of that data. You don't own that data because they do, and you won't have the transparency. So you'll have to consider how your future is going to be mapped through that terrain and when we talk about creating our media future.

Speaker 1: 29:27

Those are all the things that we have opportunities to work on, and I've highlighted some of those that are going to be important, and I also think that streaming, podcasting and branded content and partnership collaborations are going to be some avenues that you may want to explore further in future. I also think that influencer endorsements can be useful for some products and for some target audiences. So, again, a useful strategy, as is native advertising, because that's seen alongside quality content often, and content might have a storyline on some real issues occurring at the moment, and the advertising sits alongside. It might actually fit quite well with the storylines in the news. And then you've got gorilla marketing, and I think that this is a useful strategy. These are unusual things. Gorilla marketing is doing unusual things to draw attention quickly. It's often very low cost and it's a useful way for small and medium sized businesses to think about getting their products in front of the target audiences at pace where things can go viral, particularly in digital markets.

Speaker 1: 30:41

And so I come to the final question what makes us unique? Well, you've got to answer these six questions, but the first one is quite important what's unique about your organization? How can we engage our consumers in dialogue more effectively? Are we resilient and agile? Can we reallocate, realign resources at scale fast if we need to? If things change? What strategic relationships and networks should be nurtured to build a better future? Can we employ technologies to transform our business? And where are the blind spots? That's number six is a very important question. Do we have blind spots that we need to do some further research to understand? Well, that's it for our first program on advertising. Next time we'll be taking a look at the demise of the third party cookie and what that means for advertisers. So I'll see you then in the Chain Reaction Podcast. I'm Tony Hines. I'm signing off Bye for now. The Chain Reaction Podcast is written, presented and produced by Tony Hines.