Advances in technology expanded the mass media audience, but new technologies—such as the Internet—fragmented that audience. As consumers were provided with more choices, more control and a greater capacity for interacting with sources of information, the mass media environment grew increasingly sophisticated and expensive.
Specialized consultants began to insert themselves into the traditional relationship between agency and client. Experts appeared in database marketing, interactive media and all areas of market segments defined by race, ethnicity and values. They offered assistance to marketers unhappy with the services they were getting from large agency holding companies, which began to be perceived as aloof and unresponsive. As agencies awoke to this challenge, many moved to expand their capabilities. Advertising entered a period of transition: The size, structure and functions of agencies began to change, along with the nature of advertiser-agency relationships.
Some advertisers moved to consolidate accounts at fewer agencies, while others sought the services of several agencies. With a growing need to reach a global audience in an expensive mass media environment, advertisers began to cut back their ad spending. Both advertisers and agencies were under pressure to find the most effective media outlets to reach the largest audience at the lowest possible cost.
While some advertisers retained traditional organizations, others such as General Motors Corp., Ameritech Corp. and General Mills decentralized some of their decision-making, allowing brand, category and regional managers to make decisions on advertising and promotional activities faster, as market forces dictated. In addition, advertisers began moving their spending from advertising to promotion. Many changed agencies frequently, dissolving long-term relationships. As a result, methods of compensation changed as they become linked to the profitability of clients.
Small, creative boutiques developed as established agencies lost creative talent, often watching their most productive personnel leave to start their own new ventures. Small regional shops sprang up in cities such as Minneapolis; Portland, Ore.; Richmond, Va.; and Peoria, Ill., as technological innovations made the physical location of an agency less important. Advertisers and agencies relied on new forms of communication to receive and provide services from sometimes far-flung locations.
Established agencies reacted, creating niche units to serve particular clients. Specialized ethnic agencies focused on particular population groups, and with technology becoming an increasingly important tool in advertising, many agencies added separate technology departments. As the array of available media grew in complexity, big agencies spun off, or "unbundled," their media departments to provide full media services and permit them to seek clients outside the parent agencies.
Among the leading independent media companies to be spun off from traditional agencies in the 1990s were: MindShare (from WPP Group), OMD Worldwide and PhD (Omnicom Group), Zenith Media ( Saatchi & Saatchi and Cordiant), Initiative Media Worldwide and Universal McCann (Interpublic Group of Cos.), Media Edge ( Young & Rubicam), MediaCom (Grey Advertising), TN Media (True North) and Starcom and MediaVest (Bcom3).
About a decade after its founding, Cordiant split into two independent agencies, the Saatchi & Saatchi and Bates networks, to deal more efficiently with client needs.
In another major trend of the 1990s, ad agencies began to provide integrated marketing activities ranging from sales promotion, direct response and public relations to high-tech alternatives such as online services and Internet pages and advertising. The process, known as integrated marketing communication, became a popular service with marketers.
New frontier: The Internet
The vision of commerce promised by the Internet beginning in the mid-1990s offered consumers the ability to purchase the precise goods and services they needed, quickly and at competitive prices, while shopping from the comfort of their homes. That promise also fueled the launch of many Internet-based, or "dot-com," companies, such as ebay.com and Amazon.com. Many Internet companies initially offered only a single product or service, but as electronic commerce grew and bricks-and-mortar companies entered the fray, competition intensified as well.
Internet companies began offering consumers a variety of goods and services. Online auctioning opened the door for sellers to get the highest possible prices from the broadest possible group of bidders. From the mid-to-late 1990s, Internet commerce reached $8 billion and was expected to grow to $3 trillion by the end of the first decade of the 21st century, although its failure to show profits and its subsequent decline in the latter half of 2000 made such predictions seem unlikely.
Internet advertising arrived in 1994, with the launch of Hotwired. Hotwired charged sponsors a fee of about $30,000 to place ads on its Web site for 12 weeks. Initial sponsors included AT&T Corp., MCI Communications Corp., Club Med, Adolph Coors Co.'s Zima brand, IBM Corp., Harman International Industries' JBL speakers and Volvo Cars of North America.
Modem Media, an early online agency, tracked an average 40% "click-through" rate for its clients, which included AT&T and Zima. Click-through occurs when a computer user places the cursor on a Web link and clicks to go to another page.
Based on the success of Hotwired, established online service providers that already had large clienteles started attracting advertisers to their sites.
Total Web ad spending reached $300 million in the mid-1990s and more than triple that amount by 2000, according to Jupiter Research.
The number of Web sites in existence grew exponentially in the late 1990s. By the year 2000, various estimates put the number in the hundreds of millions. Less than a year later, however, hundreds of those e-commerce and media sites were shuttered, victims of a downturn in dot-com values on Wall Street, known as the "dot-bomb," that dried up venture capital.
More than ever, expectations that the Internet would lead to the demise of traditional mass media such as TV, radio and newspapers appeared unfounded, as many Internet companies retreated into bankruptcy while those that survived continued to rely on traditional media to promote their brands.
Technology also literally changed the face of advertising. The use of computers to create and alter images meant that spots could be made quite simple or extremely complex, but it led to an emphasis on nature and outdoor imagery (which could now be produced without costly trips to picturesque locations) as seen in spots where polar bears drink Coke, handled by Creative Artists Agency as part of its "Always" campaign for Coca-Cola Co. in 1993, or Jeeps burrowing beneath snowdrifts in an award-winning TV spot from Bozell, Detroit, titled "Snow Covered" for the automaker in 1994.