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The territory that was to become the United States of America was colonized by advertising in the late 1600s and 1700s. As a far-off colony of England, America was settled largely by major trading companies that hoped to profit from the riches of the New World's natural resources. Advertisements—mostly printed broadsides—urged the poor, weary, downtrodden classes of London and other overcrowded ports to venture across the sea to the "land of opportunity."

As the country grew, the predominant use of advertising was to sell goods such as tobacco and timber. The primary medium of advertising was the newspaper. The first regularly published newspaper, the Boston News-Letter, was started in April 1704.

Advertising burst upon the 1800s as the nation expanded westward. Salesmanship was honed to a fine art, and its practice helped feed, clothe and build towns farther and farther from the Atlantic Ocean. At about this time, the thriving eastern cities saw the birth of the "penny press," inexpensive newspapers whose low prices were made possible by advertising revenues. By about 1830, there were approximately 1,000 newspapers carrying advertising in the U.S.

Invention of the ad "campaign"

Showman P.T. Barnum is widely credited as being the first to employ the "modern" technique of planning and producing an ad campaign in the early 1800s. He promoted his carnivals and shows well in advance with a program of posters, parades and decorative ads in newspapers, all using the flamboyant language now associated with his name. Mr. Barnum later said that "every dollar sown in advertising would return to me in tens, and perhaps hundreds, in a future harvest."

From this example was born an industry, as manufacturers rushed to advertise their products by any means possible, making extravagant claims and exciting the imaginations of the masses.

Makers of patent medicines were the most prominent users of the orchestrated ad campaign. They produced ads for every available space—including the sides of barns and even outcrops of rock in the countryside. The marketers of patent medicines became the major U.S. advertisers in the years immediately following the American Civil War, going from sales of about $3.5 million before the war to $75 million annually afterward.

In the 1880s, St. Jacob's Oil was the top advertiser, having gone so far as to paint the hull of a Mississippi River steamer with its name. This particular product has gone down in advertising history as having "proved" the power of advertising. Flush with success, the Baltimore druggist who produced St. Jacob's Oil decided to stop spending money for ads; his sales halted.

Another product often given equal credit as an example of what not to do in advertising is Lydia E. Pinkham's vegetable compound. The "positive cure for female complaints" was an early example of "branding," with an image of Mrs. Pinkham on its label and sales messages inspired by her. The Pinkham family employed an advertising "agent" in New Haven, Conn., to place wide-ranging ads for the product, but stopped when they discovered the sizable commissions the agent was earning. When sales dropped precipitously, they switched to a new agent, started advertising again and sales once again soared.

Major milestones

The first U.S. advertising agent hung up his shingle in 1843 in Philadelphia. Volney Palmer served merely as an agent for the newspapers he represented, soliciting advertisers to fill the publishers' available ad space and collecting money for them. A man from his staff set up shop in New York and slightly changed this way of doing business—he was an independent space broker, taking his pay out of the money the advertisers remitted to the ad medium. As the marketing of manufactured goods grew, this process led to underhanded dealing and, in turn, to the reputation of advertising as a not entirely reputable business.

George P. Rowell played a major role in cleaning up the ad business. In 1865, Mr. Rowell set up a new business in Boston. With the expansion of advertising beyond patent medicines to all U.S. industry, he decided to "list" the ad rates of widespread publications, thus helping legitimize their business. He also bought print space on a mass basis, guaranteeing payment, then filled the space by placing ads on behalf of manufacturers. By 1867, he had moved to New York and had single-handedly become the largest advertising "agency."

Other milestones in the industry's growth can be traced to Mr. Rowell. His business representing publications evolved into "Rowell's American Newspaper Directory," a guide to more than 5,000 newspapers in North America that printed all of their ad rates, as well as he could determine them. By about 1888, Mr. Rowell was producing a trade magazine called Printers' Ink, placing a further stamp on advertising as an industry.

But it was Francis Wayland Ayer who changed the ad industry to serve the advertiser. Mr. Ayer opened his office in Philadelphia in 1869 to represent the advertiser and establish an "open contract" between the marketer and the publication to carry advertising. The financial terms (including the set agency commission of 15%) were established "above board." That agency, N.W. Ayer & Son (he used his father's initials rather than his own), still exists more than 130 years later, albeit as a smaller part of a larger worldwide company.

The profession received further contributions from other early practitioners. As an agent in Chicago in the 1870s, Daniel M. Lord of Lord & Thomas, Chicago, offered to help advertisers improve their ads, thus expanding the agency's role.

But the birth of the "creative" role within advertising occurred in 1880, when Philadelphia retailer John Wanamaker hired copywriter John E. Powers, who became the first person to work solely on crafting advertising messages. Mr. Powers' example of truthful, exaggeration-free advertising helped pave the way for "reason-why" advertising, a fact-based approach that sought to persuade consumers that there were solid reasons to choose a specific product. It was to dominate the business in the late 1800s and continue into the early 1900s.

Growth of print

Although newspapers were the primary medium of this period, they were all published locally. To reach a national audience, advertisers put their sales messages onto postcard-size "trade" cards that came in product packaging or were distributed by grocers.

The printing industry then moved into consumer magazines. Prominent in this area was Cyrus H.K. Curtis, who in the 1883 expanded an idea from his farm magazine to produce a magazine for women, the Ladies' Home Journal.

Until this point, most magazine publishers balked at accepting advertising. But Mr. Curtis charged readers less and based his publication's profits on revenue from advertisers. The Ladies' Home Journal was the first magazine to surpass 1 million readers. Mr. Curtis next bought a men's magazine that traced its roots to Benjamin Franklin, The Saturday Evening Post; after 10 years, it had 2 million readers, up from about 2,000 at the time of purchase.

J. Walter Thompson entered the advertising agency business in New York and earned his reputation promoting magazines as a national ad medium. He worked to develop a so-called "Standard List" of publications that he represented. As Mr. Thompson's business developed, the agency moved beyond magazine exclusivity and became one of the first full-fledged, modern advertising agencies.

Ad expenditures in the years following the Civil War are estimated to have been around $40 million; by 1900, they were the equivalent of $450 million, a full 3% of the country's gross national product at the time. Among the groundbreaking advertising as the new century dawned was that for the National Biscuit Co.'s Uneeda biscuit, the first food product previously sold in bulk to be individually packaged and branded. Henry N. McKinney of the Ayer agency came up with the brand name, and the product was supported with the first $1 million ad campaign.

Other advertising successes of the late 19th century included Kodak cameras, Kellogg and Post cereals, and Prudential Insurance with its "strength of Gibraltar" slogan. Eastman Kodak was reported to be the largest U.S. advertiser in 1899, spending $750,000.

Emerging professionalism

Although the agency business was firmly established as advertising entered the 1900s, the creation of the actual ads still remained the province of manufacturers. Among the men who helped make the practice of creating advertising a worthy occupation by the turn of the century were Nathaniel Fowler, Charles Austin Bates and Earnest Elmo Calkins.

Mr. Calkins concentrated his attention on the use of art to enhance ad messages, and in 1902, he formed Calkins & Holden. Mr. Calkins presided over artists at his shop, and his agency was prominent in the creation of ad jingles as well.

Mr. Thompson of JWT pioneered the use of "account executives" to manage the expanding internal work of the agency on behalf of the client and, when necessary, to explain the process to the client.

But the man who took the agency business itself to new heights was Albert D. Lasker, who joined Lord & Thomas in 1898. Mr. Lasker, who became one of the greatest copywriters of advertising's formative years, brought in tremendous business for the agency. By 1903, at the age of 23, he became one of its owners by buying out Daniel Lord. One of his significant decisions was hiring John E. Kennedy as a copywriter. (Although few agencies had full-time writers as yet, N.W. Ayer & Son established a copy department at about this time.)

Mr. Kennedy had secured the job by telling Mr. Lasker that advertising was nothing more than "salesmanship in print" (also reported as "salesmanship on paper"). In 1908, Mr. Lasker hired Claude Hopkins, a copywriter who became the most prolific practitioner of "reason-why" advertising. Mr. Hopkins who conceived of advertising Schlitz beer as "steam cleaned," an attribute of the production process for all beer; he also toured a Quaker cereal plant to see grains "shoot" upward in the processing to increase their size and came up with the ad slogan "Shot from guns" for Puffed Wheat and Puffed Rice.

Lord & Thomas' billings went from $800,000 in 1898, when Mr. Lasker joined, to $6 million in 1912, when he finally bought out the remaining partners. At that time, Lord & Thomas was the largest ad agency in the U.S.

Some of the firsts in advertising during this period were the use of coupons (by Lord & Thomas) and the introduction of ad appeals keyed to beauty (also by Lord & Thomas, for Palmolive soap). JWT is credited as being the first to use sex appeal in advertising, with the legendary slogan for Woodbury's soap, "The skin you love to touch."

At the same time, increasing government regulation cleaned up some of the longtime abuses (the Pure Food & Drug Act of 1906 targeted patent medicines), although many such products remained active. Self-regulation of the advertising industry also surfaced, without great success, first with a national confederation of adclubs, then a breakaway Association of National Advertisers (1910) and American Association of Advertising Agencies (1917).

Advertising and the auto industry

The U.S. ad boom also was fueled by the new automobile industry. By 1907, Henry Ford's Ford Motor Co. had produced a car—the Model T—priced for the masses. General Motors Corp. was created through the merger of several independent automakers in 1908 and later competed with Ford by developing more appealing cars and more appealing advertising. Ford, on the other hand, was a reluctant advertiser, striving instead for free publicity.

With the advent of automobiles, U.S. advertising also took to the roads, highways and byways of America. Posters and signs spread across the country at a rapid pace. Barns carried product names, such as Mail Pouch tobacco; lighted signs earned New York's Broadway the nickname "The Great White Way"; neon signs came in the 1920s.

Back out on the highways, 1925 saw another first—the amusing verse signs created by Minnesota-based Burma-Vita for its new product, Burma-Shave. The signs dotted U.S. highways into the early 1960s. Advertising also took to the air: The Goodyear blimp made its appearance in 1925.

Advertising did not slow its pace even in wartime; in fact, as much as $1.5 million in donated ad space supported government efforts in World War I, with private companies also featuring war themes and pushing Liberty Loans. Ads for the Red Cross earned widespread fame; a poster illustration of Uncle Sam by artist James Montgomery Flagg that declared, "I Want YOU for U.S. Army," has enjoyed enduring fame.

In 1918, armistice brought a return to the consumer economy and increased ad budgets by industry. Expenditures went from $1.24 billion in 1918 to $2.48 billion in 1920.

Radio and TV

Money aside, monumental change hit the ad business in 1920, when the first radio station—KDKA in Pittsburgh—went on the air. Although commercial messages were resisted initially, within two years a 15-minute commercial for a real estate development in Jackson Heights, N.Y., aired on New York station WEAF with tremendous success. The new broadcasting industry went on to carry entire programs that were sponsored by advertisers.

Among the earlier advertisers was the American Tobacco Co., marketer of Lucky Strike cigarettes. Through Lord & Thomas, the "Lucky Strike Dance Orchestra" program was heard nationwide on the NBC network. The medium's power was tested when the company temporarily stopped all advertising in newspapers and magazines. In those two months, the brand's sales rose 47%.

Blackett-Sample-Hummert, an offshoot of Lord & Thomas, created the soap opera, aimed exclusively at American homemakers. From Procter & Gamble Co., for Oxydol laundry detergent, came the serial "Ma Perkins." In the 1930s, B-S-H handled more radio shows than any other agency.

Lord & Thomas and JWT dominated the new medium in the early days, other major agencies, including Young & Rubicam; Batten, Barton, Durstine & Osborn; and Benton & Bowles, were formed in the 1920s.

Those developments continued despite the Great Depression. P&G, for one, believed strongly that it should continue advertising its household goods during hard times. Between 1935 and 1937, it more than doubled advertising expenditures on radio alone. Generally, however, the industry witnessed a drop in spending, from $3 billion in 1929 to about $1.3 billion in 1933.

During this period, ad pitches focused on necessities. Lever Bros. invented "B.O." (the letters behind the concept stood for body odor) to sell its soap, and Gillette pitched razor blades by showing facial stubble as the reason for one man failed to get a job. The industry encountered new criticism in these years; in a movie, the popular humorist Will Rogers characterized advertising as something that "makes you spend money you don't have for something you don't want."

There were threats of a government takeover of the business. Y&R's Raymond Rubicam worked tirelessly to maintain ethical standards for advertising in tough times. His agency grew to be ranked No. 2 behind JWT during these years. Notably, it was Mr. Rubicam who brought opinion research into the business when he hired George Gallup to work in advertising.

Despite these efforts, 1938 brought greater regulation of the business, when Congress gave increased powers to the Federal Trade Commission and the Food & Drug Administration. Soon, the FTC began to issue injunctions that put a halt to some ad claims. That was also the year that radio replaced magazines as the No. 1 medium for advertising.

But as the U.S. emerged from its economic woes, World War II broke out. The industry offered its services to the government, and the War Advertising Council was formed, a predecessor to the Advertising Council, which continues to administer public service messages. During this war, advertisers continued to support their consumer products at similar levels; expenditures approached $3 billion by 1945, up from around $2.2 billion in 1941.

Also during the war years, Mr. Lasker retired from the advertising business, handing his agency to three associates—Emerson Foote, Fairfax Cone and Don Belding.

The postwar years witnessed a tremendous boom for the U.S. Such ad agencies as JWT, BBDO, Y&R and McCann-Erickson each surpassed $100 million in billings by the early 1950s. The $2.84 billion in ad spending registered in 1945 was dwarfed by the 1950 figure: $5.7 billion (2.9% of the GNP). Automobile advertising soon surpassed that of everyday household products, and GM became the leading national advertiser.

The biggest impact on advertising following World War II came from TV. While TV was invented in the late 1920s, and the first TV commercial, for Bulova watches, aired in 1940, significant broadcasting did not begin until late 1944 with the first successful network TV program, "The Gillette Cavalcade of Sports." The next year, the Federal Communications Commission approved commercial TV, and retailer Sears, Roebuck & Co. began selling TV sets.

By and large, major advertisers sponsored and produced the programming. American Tobacco moved right into the medium with its radio show, "Your Hit Parade." Soap operas also made their way to daytime TV.

Although NBC altered the pattern when it produced "Your Show of Shows" and sold time to multiple sponsors, it wasn't until 1959 that the networks supplanted advertisers as owners and agencies as producers of the programming. That change came as the result of the TV quiz show scandals in the late 1950s, when it was revealed that many popular quiz shows had been rigged by ad agencies to keep audience numbers high.

The new consumerism

The post-World War II era can be seen as the second boom period for U.S. advertising (the first was the latter part of the 1800s and the early 1900s, when it became an industry). From 1949 to 1951, advertisers are said to have boosted their TV spending from $12 million to $128 million.

The reason for the boom was that TV was a visual medium, perfect for the live demonstration of products. Stars personally endorsed their brand sponsors—"See the USA in your Chevrolet," sang performer Dinah Shore. Cartoon characters such as Speedy Alka-Seltzer were created to strut and sing the praises of products, virtually becoming symbols for the brand (much like the initial wave of trademarking at the turn of the century, when registrations of distinguishing symbols for products jumped from just over 100 in 1870 to more than 10,000 by 1906).

Ad agencies, too, multiplied in the early 1950s, with startups, mergers and growth the result of an increasing demand for advertising services. New shops gaining fame included Leo Burnett Co., a prewar startup in Chicago that created many animated characters associated with its clients' brands—the Green Giant for the popular vegetable line; Snap, Crackle and Pop for Rice Krispies cereal; and Charlie the Tuna for Star-Kist.

In New York, Rosser Reeves of the Ted Bates agency put forward his hard-sell theory of a product's "unique selling proposition." The USP was behind his spot featuring an animated pounding head and repeated "Fast, fast, fast relief" slogan for Anacin headache remedies. Another was "Melts in your mouth, not in your hand" for M&M's candies.

Mr. Reeves' style flew in the face of another widely used tool of the 1950s, motivational research. The practice of studying consumer behavior became a subject of a best-selling book in 1957, "The Hidden Persuaders" by Vance Packard, which had a negative effect on the industry during this Cold War-inspired, Big Brother-fearing era.

Another visionary who had a far-reaching effect on the agency side of the industry was Marion Harper Jr., who built McCann-Erickson into Interpublic Inc., a large, multiservice conglomerate. The agency was the first to encompass virtually all disciplines of mass marketing.

Meanwhile, Leo Burnett, William Bernbach (of Doyle Dane Bernbach) and David Ogilvy (of Ogilvy & Mather) were beginning to lead advertising into a new era of creativity.

In 1955 for Philip Morris Co., Mr. Burnett repositioned a low-selling women's cigarette brand called Marlboro to one targeting men, with its image built around the cowboy, the West and the wide-open spaces of "Marlboro Country . . . where the flavor is." Sales went up 3,000% in one year as the new brand image made Marlboro the top-selling cigarette worldwide.

In 1959, Mr. Bernbach broke a campaign for a German-import auto into the U.S. car market, the Volkswagen Beetle. Not only had the vehicle been a project of Adolph Hitler, it was also terribly small for a U.S. auto market dominated by large cars. But Mr. Bernbach took his style of clean, uncluttered, understated advertising to its zenith with such print ads as "Think Small" and "Lemon."

Mr. Ogilvy turned his philosophy of well-researched ideas, intelligently executed, into the other key driving force in advertising during the 1960s—a period now known as the "creative revolution."

Mary Wells, the first woman to head a major ad agency, was reportedly the person who made the most money from this period of creative flowering. Advertising became high art, and expenditures soared. From 1959 to 1971, ad spending in the U.S. climbed from $11 billion to $20.7 billion.

Amid this exuberance, consumerism and government regulation were having an impact on the industry as well. The last half of the 1960s, following a report by the U.S. Surgeon General on the health hazards of smoking, was filled with attacks on cigarette advertising. In 1971, Congress banned broadcast advertising of tobacco products—a loss of about $220 million annually for TV and radio.

The wave of reform also brought about the development of real self-regulation by the industry, which established a National Advertising Review Board in an alliance of the major ad associations—the American Advertising Federation, the Association of National Advertisers, the American Association of Advertising Agencies and the Council of Better Business Bureaus.

This did not keep the federal government away completely, however, as new regulations were directed at advertising to children and, for the first time, a major product marketer was ordered to advertise the fact that its previous advertising had been deceptive to consumers. The product was Listerine, the ads for which in the early 1920s had coined the word halitosis, for bad breath, to great effect.

During the 1970s, advertising once again became more serious. Previous ads never mentioned a competitor—"Brand X" was born in the early 1950s as a stand-in. In the 1970s, for the first time, direct comparisons in advertising were encouraged by consumerists, and brand names were named.

While the business of creativity had ruled advertising in the 1960s, the business of business ruled in the 1970s, as a wave of ad agency mergers changed the Madison Avenue landscape. With multiplying layers of shops, billings at the top agencies grew faster than the GNP. Ad spending soared to $53.7 billion in 1980.

Advertising as entertainment

The 1980s brought a return to more "showy" advertising, as advertising became a form of entertainment in addition to a selling showcase. New techniques in commercial production made for extravaganza effects in TV spots.

A 30-second spot on the National Football League's annual Super Bowl game in January went for $500,000 in 1984, when Apple Computer advertised the introduction of its Macintosh personal computer with the now-legendary "1984"spot from Chiat/Day, Los Angeles.

In another notable campaign of the period, Pepsi-Cola Co. enlisted the aid of pop music superstar Michael Jackson to perform in a series of commercials; it paid $5 million to sign him and $2 million just to produce the spots.

With ad expenditures exceeding $100 billion and single companies—such as GM and P&G, the perennial leaders—spending more than $1 billion each year from 1985 onward, acquisitions and mergers among ad agencies increased to a degree never seen before. Saatchi & Saatchi, London, used its public ownership status to generate enough money to buy such old-line U.S. agencies as Compton Advertising and Dancer-Fitzgerald-Sample.

Largely as a result of the new climate on Madison Avenue, the most monumental merger ever was engineered in 1986. BBDO, Doyle Dane Bernbach and Needham, Harper & Steers combined to form Omnicom Group.

Possibly more important to the industry, WPP Group, an offshoot of Saatchi & Saatchi, pulled off the first hostile takeover of a U.S. agency, the venerable JWT. The price of the takeover, completed in 1987, was $566 million. Two years later, WPP made another such raid on the stock market in the U.S., acquiring Ogilvy & Mather for $864 million. Thus, WPP became the largest advertising organization in the world.

Although there were recession and cutbacks in the ad industry itself—ad expenditures in 1991 were $2 billion less than they had been the previous year—the U.S. economy and marketplace were gearing up for a tremendous boom in the late 1990s, and advertising again was playing a role in the greatest consumer growth ever. In 1998, ad spending topped $200 billion; a single 30-second spot on the Super Bowl telecast sold for $22.3 million. In 2000, the WPP Group acquired Young & Rubicam for $4.7 billion.

Industry rankings

However, as the 21st century began, advertising followed the U.S. economy into a serious downturn. For 2001, U.S. agencies had U.S. gross income of $18.54 billion, down 2.2% from 2000. In Advertising Age's ranking of U.S. agencies by gross income, Grey Worldwide topped the list, followed by JWT, McCann-Erickson Worldwide, Leo Burnett Worldwide and BBDO Worldwide. The top ad spender in 2001 was GM, followed by P&G, Ford, PepsiCo and Pfizer. The 100 leading U.S. advertisers spent a combined $80.94 billion in 2001, down 1.3% from the previous year.

In spending by media, network TV drew 16.7%; magazines, 8.6%; spot TV, 7%; cable TV, 6.7%; newspapers, 6.5%; syndicated TV, 2.9%; national newspapers, 1.2%; national spot radio, 1%; the Internet and outdoor advertising, 0.7%; Sunday magazines, 0.5%; network radio, 0.4%; and the Yellow Pages, 0.2%; unmeasured spending made up the remaining 46.9%.

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