A brief history of digital advertising

Note: This is my first attempt to distill the history of digital advertising into a brief article. If you notice an error, please email me at rick@ricklindquist.com or reach out to me on Twitter. I’m @RickLindquist. I plan to update this article as I become more knowledgeable about this topic.

Advertising dates back to the ancient Egyptians’ steel carvings in 2000 BC, but the digital advertising ecosystem is less than 30 years old. With the rise of the internet and its ability to collect precise data on people, advertising has become much more targeted and personalized.

Digital advertising, also known as online advertising, includes any advertising that uses the Internet to promote products and services to online audiences. Today, numerous digital advertising channels are available to advertisers, including display, video, mobile, social, and search.

The three core players in the digital advertising ecosystem are advertisers, publishers, and audiences. Advertisers buy advertising space on publishers' websites in order to reach their desired audience.

The first display ad appeared in 1994. It was purchased by AT&T from HotWired, a web magazine, for $30,000 for a run time of three months.

In 1995, display ads become more targeted around specific consumer demographics. The original digital ads were obnoxious flashing banner and sidebar display ads that allowed digital publications to make their content available for free. Most people hate banner ads today, but they revolutionized advertising.

In 1996, digital advertisers started looking for ways to measure results. DoubleClick emerged as one of the first ROI tools for digital ad campaigns. Its service (D.A.R.T) enabled advertisers to track the number of views and clicks per ad and to track how their ads were performing. It also enabled advertisers to make changes to a live campaign without needing to wait until the campaign finished. This improved ad tracking laid the foundation for more efficient performance-based pricing models like CPM and PPC. The Interactive Advertising Bureau (IAB) was also founded to streamline industry standards, conduct research, and provide legal support for the online advertising industry.

In 1997, Ethan Zuckerman invented pop-up ads, and pop-up ad blockers were quickly invented to combat them.

In 1998, Google introduced a new and improved search engine to help internet users navigate the growing web of pages.

As click-through rates started to drop on display ads, advertisers started turning to search advertising. This led to search results that were largely determined by how much a company was willing to pay, and it was unclear to users which results were paid and which were organic content. This created an opportunity for Google to create a search experience that generated revenue without compromising the quality and relevancy of search results.

In 2000, Google introduced AdWords under a pay-for-placement pricing model. AdWords introduced a Quality Score model, which took into account an ad's clickthrough rate when determining its placement on the search results page. Even if an ad had a lower bid, it would still appear above other, less relevant ads in search results thanks to its high clickthrough rate.

In 2002, the first ad blockers became available. This led to a battle between publishers and adblockers. Google also introduced a pay-per-click (PPC) pricing model to replace legacy pay-per-placement pricing.

In 2004, Facebook launched.

In 2005, YouTube launched. A year later, it launched video ads and was purchased by Google for $1.65 billion.

In 2006, Twitter launched.

Social media revolutionized digital advertising by enabling increased targeting based on people’s demographics and interests. Facebook pioneered modern ad targeting with an emphasis on quality over quantity. As Facebook founder Mark Zuckerberg put it, “Our strategy is much less [about] increasing the volume of ads and much more about increasing the quality of the content and the quality of the targeting to get the right content to the right people.”

In 2006, Outbrain launched its content discovery platform.

In 2008, Facebook introduced Engagement Ads that allowed users to interact with the ads by commenting, sharing, and liking the ad.

in 2009, new real-time bidding (RTB) technology made it easier for ad networks to buy only the inventory they wanted.

In 2010, Instagram launched. Twitter introduced promoted content. Advertisers started recruiting celebrities to promote their brands and services to their followers.

In the early 2010s, content providers started to realize they could provide a better user experience by providing relevant and valuable sponsored content via native advertising. With native ads, advertisers pay to sponsor or produce promoted content. The format looks and feels less like an ad and more like a regular piece of content on the host's website. Native advertising increased in popularity.

In 2016, digital advertising revenues in the United States surpassed those of cable and broadcast television. Also, mobile ad spending overtook desktop for the first time.

In 2017, the IAB Tech Lab introduced Ads.txt to improve transparency in the programmatic ecosystem and combat ad fraud.

In 2018, the European Union implemented General Data Protection Regulation (GDPR), which imposed restrictions and requirements on how personal data can be collected and handled.

In the early 2020s, the pandemic accelerated the shift from linear TV to connected TV (CTV) and over-the-top (OTT), giving programmatic advertisers a new medium. More and more digital advertisements are now delivered programmatically via automated software systems.

Today, digital advertisers have access to billions of data points about consumers that enable them to create hyper-targeted and personalized ads. However, new privacy laws and the impending deprecation of third-party cookies are challenging the way advertisers approach data.

Have thoughts on this topic? I'd love to hear from you! I'm @RickLindquist on Twitter.